Flip or Rent - You Decide...

Learning how to evaluate properties is one of the most valuable skills to make you successful as a real estate investor. Some may wonder how to determine if a property is a rental or a flip. Here is my process when evaluating Rent or Flip. In my opinion this is the first thing to do on every single property.

1. Determine the lowest amount you can purchase the property by reviewing the current comps in the area.

2. Determine what the comps of the top properties in the same neighborhood (within 1 mile). Make sure you use the same square footage and type of home (don't compare a one story with no garage to a two story with garage for example).

3. Determine the difference in #1 and #2. If the difference has enough room to do the renovation (similar to the features in the highest comp you found in #2) AND get profit then it is a flip. (You may need to add another step to determine the renovation budget, but you guys / gals seem pretty smart so I think you can figure out a good ballpark guess here) If there is just enough to do the renovation? Move to step #4

4. Determine how much rent you can charge by contacting a property management company or a site like rentometer.com 

For clarity, here is an example.

Property Price = $100,000

Highest comp = $250,000

Estimated Renovation = ???

You have $150K to work with in this example. So depending on how much you want to earn (and how much needs to be done) this may be a good deal. Say the house just needs a new kitchen and baths. Maybe you can do this for $50K? How much profit would that be? (Score!)

Maria