Your First Fix and Flip Real Estate Investment
So, you’re ready to take the fix and flip real estate investment plunge!
You’ve watched all of the HGTV shows, attended several seminars, and read a few books. Now what? Several times a week, the Walnut Street Finance team meets with a newly minted investor who’s interested in diving into a fix and flip real estate investment. The pool is filled with smart and successful people possessing solid business acumen, but with a plethora of information floating about, many investors are stuck treading water. So many options, so many opinions – what to do next?
Walnut Street Finance will coach you through the race!
First Lap:
- Study the geographic area of your targeted investment property to ensure that it will sell (or lease up, if applicable) quickly. Several key markers include market conditions, buyer demand, school quality, local employment data, and foreclosure rate.
- Find an experienced mentor. It’s always easier to learn from someone else’s mistakes rather than your own.
- Set attainable goals and budgets. Be realistic about all costs associated with the investment – transaction expenses, repair & labor costs, carry costs, and marketing budget, just to name a few.
- Prepare a Personal Financial Statement (PFS). This as much for you as it is for your lender, as you need to determine what assets you have and what you can afford.
Around the Turn:
- Gain access to the Multiple Listing Service (MLS) to keep fresh tabs on finds in the market.
- Interview contractors and make sure you are completely satisfied with your choices. Contractors will soon become your best friends throughout the process.
- Develop a comprehensive pro forma to quickly analyze deals. This will allow you to eliminate non-profitable investments efficiently and move on to the next opportunities.
- Build a solid team. You’ll need a real estate agent, insurance agent, home inspector, surveyor, attorney and accountant.
- Find a hard money lender to close quickly and gain access to construction funds and a mortgage banker for end-user take-out financing.
Heading for the Finish Line:
- On the day of acquisition, it’s time to set your plan in motion. Preparation is everything.
- Conduct at least five property visits per month to ensure the project remains on track and on budget.
- Market your property “to the moon and back” and list it before mums are in season.
- Expect the unexpected! No project goes 100% as planned, but as long as you go into the project anticipating a few bumps along the way—and budget a contingency accordingly—you’ll be well-equipped to navigate the detours.
We know the first deal can be intimidating; after all, the water IS cold and deep. But dive in and hit your stride like DC-native Katie Ledecky. While you probably won’t win Olympic gold, our goal is for you to make some gold!
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