Flipper Makes 50k More Than Expected - Mistake
Making more than $50,000 more than anticipated on a house flip is quite a pleasant surprise for anyone. How is it possible that this could happen? There are a few things that can be done that are within the flippers control and a few that are out of his control. This particular client of ours did some things really right when setting the table for this one. The key to getting this kind of upside is making sure that anything that you can influence in the process you do. Anything you can't influence you get a little bit of lady luck on your side. The first area you control is the buying price and know how much you should pay. It all start with properly running your comparable sales. A good flipper will look at the range of comparable sales and know what their high end and low end for renovated properties looks like. The conservative flipper will base their acquisition price on the low end because they know worst case scenario on the resale they still make money. The next area that a flipper can control the outcome of the project is in the construction phase. A savvy flipper will account for everything on a project and then add a buffer for error or unknown. These two differences on a project can be the difference between making a lot of money on a flip and losing money. They seem subtle and somewhat obvious but being honest with your self on your numbers and what the market is giving you is crucial. The factors that are out of your control would be things like new construction going up during your project and increasing values that you couldn't see, a drop in interest rates or other properties selling higher than when you ran your comparable. In this particular instance the client purchased based on low comps, didn't end up having to use his construction buffer (+15% profit) and there was a comparable sale that went off 10% higher than anticipated right before his hit the market. Those numbers add up and can yield a massive profit.
Ian Walsh
215.839.3271
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