If you’re looking to purchase real estate to flip and make a profit, you’ve got your work cut out for you. Renovating is a mammoth task, and requires careful planning and a strong team of professionals on the job. But before you even think about the renovation project, you need to find the right property.
While there are always plenty of run-down homes on the market, there are many things you should consider before choosing the right property. From the location and price to the condition of the home itself, you’ll want to make sure that you’re making a fully informed decision that makes this venture worth your while.
To help you make the right choice and increase your chances of a successful renovation, we’ve compiled this guide to choosing the right property to flip. This way, you can be sure that you’ve dotted all your I’s and crossed all your T’s, and set yourself up to turn the largest profit possible.
Choose the worst house on the best street
One of the most important things to consider when buying a property is the location. Although you may be able to buy something cheaper in a less desirable neighbourhood, that may also impact your ability to sell it for a considerable profit or find an appropriate tenant.
Buying a home that has great amenities nearby, such as schools, parks, shops and public transport, will help increase your chances of a successful investment. You want to make sure the elements that are out of your control won’t negatively affect down the track and put all your hard work to waste.
By purchasing the worst house in the best street, you’re likely to get a good deal for the area. On top of this, the home will already come with marketability and an instant appeal to buyers or tenants. To help find the right suburb, have a look at real estate listings to find areas that have high rates of auction success and a competitive rental market.
Prepare your finances
Purchasing a property to flip takes some financial commitment, as you’ll need enough money to both cover the purchase price as well as the renovation costs. The time it takes to start making some money back will depend on the scale of the renovations and whether you plan on selling or leasing, but either way, you’ll be out of pocket for a while.
One of the first things you should do is discuss your options with a financial advisor. If you already own a home, you may be able to use equity to purchase this additional property. If not, you’ll have to make sure you have enough money in the bank to pay a deposit, make your home loan repayments and fund the renovations.
Make sure the property has good bones
Buying a property with good structural integrity will make for a smoother renovation process and potentially save you tens of thousands of dollars. Homes with a strong foundation, good layout and an open floor plan will be cheaper and quicker to renovate, increasing the likelihood of you making a healthy profit and staying within budget.
A reliable electrical and plumbing system is also important, as these can be extremely costly and time-consuming to repair or replace. Your goal is to spend as little as possible, so find real estate that only needs superficial upgrades rather than being completely gutted is key.
Work with a trusted property inspector
If you think you’ve found the perfect home, don’t get too carried away and make any rash decisions. Just like if you were buying somewhere to live yourself, always get a property inspection before signing on the dotted line.
A home may look great on the outside, but you never know the true condition of a property until you have it assessed by a building inspector. They will be able to tell you of any problem areas that could inflate your renovation budget and jeopardise the entire project.
Issues such as termites, roof damage, plumbing and electrical faults and water damage are just some of the problems commonly found by property inspectors. Make sure you work with a professional that offers comprehensive inspections and a quick turnover time.
Be aware of local council regulations
Even if you haven’t already found the right piece of real estate yet, you have a vision of what you want the end product to look like. Unfortunately, there are many rules and regulations you’ll have to follow when renovating or building any home, and this all depends on local laws.
So, before you choose a property, make sure you’re familiar with its local council and how they operate. While you generally won’t need to be approved for internal renovations such as new cabinets or flooring, you will need approval for structural changes such as extensions and second storey additions.
Many councils have different regulations on the size and height of these renovations, and the additions of decks, fences, carports and sheds. Visit the local council’s website or reach out directly to find out more information and develop an understanding of what type of regulations you may be working with.
Stick to your budget
Your budget exists for a reason, and you put yourself at great risk by going over it. You must remember that you’re in this to make a profit, and if you overspend then you may find yourself struggling to barely break even.
Your budget should be one of the first things you decide on before embarking on this journey, as it will dictate many of the decisions that you make. This will ensure that you’re in a good position to achieve your goals and make a successful investment.
Finding the right piece of real estate to renovate for profit is a complicated process, and isn’t something that should be rushed. While there are always risks involved with property investment, following the tips outlined in this article will help you to make the most informed decision possible and find great success in the property market.