Tips to Keeping Your House Flipping Profit Margin High

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Climbing Houses

You’ve been on the hunt for the perfect property, and you think you may have found it. But, before you sign on the dotted line, review these tips and tricks from our fix-and-flip experts to make absolutely sure the property you’ve chosen will help you pull in the profits you’re hoping for.

  •  Know the After-Repair Value (ARV) of the Property

The main priority for your renovated property is to make sure it’s going to sell again when you put it back on the market—and quickly. Every aspect of your house flipping plan is impacted by ARV, so conducting a thorough analysis of local comps and evaluating the condition of the property and the surrounding neighborhood is critical.

If you need help determining the ARV of a property, here’s how to estimate the After-Repair Value opens in a new window of your fix-and-flip property.

  •  Get Your Capital from a Reputable Source

Once you’ve set your sights on the perfect property, acting fast is the name of the game in order to make it yours. You have several options when it comes to securing funds and keeping your fix-and-flip project moving. Those options range from personal loans to regular bank loans to hard money lenders. As a long-term partner with competitive rates, Anchor Loans prides itself on being a reputable source of hard money loans for thousands of fix-and-flip projects nationwide. Our short-term rehab loans are specifically designed for ease, speed and flexibility—all of which matter most when your profits are on the line.

Need help finding the lender that’s right for you? Check out this blog article: “The Borrower-Lender Relationship: How to Choose the Lender that’s Right for You”.

  •  Buy in the Best

We recommend finding the worst home in the best neighborhood, not vice versa. While it may be tempting to transform an aging mansion on a block of unkempt homes, when it comes time to sell, you may have a harder time than you anticipated due to its less-than-ideal location. On the flip side, if you’re buying in a place that people actually want to live, once you fix up the former eye sore, it’s more likely than not that buyers will quite literally be knocking on your door, ready to make a purchase.

Need tips on how to find the best fix-and-flip deals? Read “How to Find Fix-and-Flip Deals”.

  • Stay Focused on Your End User

Keeping your end user top-of-mind throughout the fix-up process will help you avoid straying from what matters most. Whether you’re hoping to appeal to a young, active family or a retired couple, the choices you make during the renovation process will greatly affect your chance of enticing the right potential buyers down the line.

  •  Time is of the Essence

Each day you spend renovating your property puts you one day further away from collecting on your profit. Beyond spending your valuable time throughout the renovation, you’re also spending resources that will be saved when you put the property back on the market. That’s why when your profits are looming, it’s best if you can find something that can be updated quickly and efficiently.

  • Find Your A-Team

When it comes to the rehab team you choose to help you complete your fix-and-flip, you can’t be too careful. This is especially important if you’ve never flipped a property before and are unsure of how the process should go. If you have the knowledge and skill required and are able to hire your own workers, you can’t go wrong with trusting the work being done. If you’re not able to do that, hiring a reliable team of contractors and real estate experts is truly the most crucial piece of the entire puzzle. Being selective now will pay dividends down the line when you’re trying to sell.

For advice on choosing the right team for your fix-and-flip, check out these real estate investing podcasts, which offer fix-and-flip investors a wealth of expertise.

  • Be Fair with the Cost of Repairs

If you start out by underestimating what it will really take to renovate your property without cutting corners, you’ll only get into rough waters down the line. Invest in the time it takes to really understand how much things are going to cost. Call around and get estimates. Familiarize yourself with experts who will be honest about the cost of everything from a tear-off roof repair to a brand new, efficient furnace. While the price tags may give you sticker shock now, being prepared and realistic will pay off in the end.

  • Keep Your Eye on the Budget

Once you’re in the thick of repairs, it’s easy to get carried away. But, upgrading a finish here and throwing more into a tile job there all adds up quickly, which only means less on your bottom line at the end. Instead, go in with a game plan and promise yourself you’ll really adhere to it, even when beautifully tempting enhancements try to get the best of you. Chances are, if you’ve found the right property in the right location, adding those fancy upgrades won’t get you a return on your investment anyway.

  •  Know Where to Put Your Money

Going along with our last tip, make sure you’re investing your bigger chunks of change in the right areas. For instance, the kitchen and bathrooms are typically what get buyers excited. So, while it goes without saying that the entire space will need to shine, putting some extra elbow grease—and money—into these two areas will really help set apart your property in the end.

Want more tips on where to focus your rehab resources? Read Maximize Your Fix-and-Flip Property’s ROI with These Top 5 Upgrades

  • Remain Neutral

When it comes to selecting finishes, less is more. When buyers enter a perspective property, they immediately begin to picture their own lives there. Bold design decisions can hold them back from doing so, as they will be far too distracted to visualize where they’d put the bed or couch. While the trend was in the gray zone for quite some time, the neutral with the most buzz around it these days is just good old tan. Choose a bright, light version of this shade and you won’t go wrong.

  •  Keep It Clean

Once you’ve neared the end of your fix-and-flip journey, there is a bit of housekeeping—literally—that should stand between you and the For Sale sign in the front yard. After putting so much blood, sweat, tears and money into your investment, the next step should always be to give the property a good old-fashioned scrub down. While it may seem tedious and time-consuming, we can assure you that no prospective buyer is going to put in an offer on a house that is completely covered with dust. Go the extra mile now; your profits will thank you later.

  • The Price is Right

When all is said and done and you’ve completed the rehab portion of your flip, your next important task will be setting the perfect sale price. This is where a real estate expert will really make all the difference, as he or she will help you find a price right in the sweet spot: not so high that it doesn’t attract buyers, but not too low to disrupt your desired profit margin. Once you’ve settled on a price, sit back and enjoy the moment you’ve been waiting for: watching the offers roll in!

  • Take Note

As you make your way from fix to flip, keeping detailed notes throughout the entire process will pay dividends down the line. Whether this is your first flip or your fifteenth, there is bound to be something that arises during the process that you weren’t expecting. It’s just the name of the game in this industry. Keeping detailed notes about the entire process—including what you learned and how you overcame any and all challenges—will help you in the future when similar situations undoubtedly come up again.

Each of these tips can help lead to higher profits, if you’re savvy in your approach. Remember, the experts at Anchor Loans are available to provide guidance and answer questions. You can contact us at any time and we’ll share our expertise with you.

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