Archive for August, 2012
Rules For Flipping By: James Dainard & Robyn Woodman
10 Rules When Purchasing An Investment Property To “Flip” – Part 1
There are many things to remember when purchasing a property for a quick resale or “flip.” Of all the rules I will share, the absolute most elemental thing to remember is this: while in the recent past the term “flipping” has developed a somewhat negative connotation because of some less-than-reputable individuals, I can assure you that there is nothing “shady” about this business as a whole. There are true Real Estate investors/professionals out there who approach this business with integrity. We have flipped 600+ properties and pride ourselves on a quality product and company transparency while maintaining our goal of investors realizing maximum profits at closing, every time.
With that out of the way, I would like to share a series of the 10 most important rules when purchasing an investment property to flip. We at Invest Now, LLC live and die by these guidelines when purchasing properties and have avoided many a headache by doing so. Nothing in Real Estate is foolproof, but setting your own guidelines and sticking to them can eliminate 99% of the headaches. Like we always say, “You win when you buy.” Happy Flipping!
1. Understanding The Geographic Area
Purchase properties in neighborhoods you have researched thoroughly and know well. It doesn’t get simpler than this, but ometimes this crucial step can be overlooked. It’s important to know what is selling in the neighborhood, what upgrades need to be done to
the property and the average days on market. All of these answers will feed into your remodel budget, affect carrying costs and, you guessed it — determine your bottom line. Knowing the answers to these questions can make all the difference between a deal that either makes you money or costs you money. Knowing your end-user buyer is key. Once you have identified who they are, start thinking like them. A highdemand area like Ballard attracts high-income buyers. They have expectations of granite in the kitchen and bathrooms, hardwoods on the main level and a designer color palette on the walls throughout the property. They are well-capitalized and willing to pay top dollar to live in this highly prized neighborhood with all the bells and whistles in their home. Contrast that with neighborhoods in the Tacoma area that have high inventory and less-capitalized buyers. The median house price will be lower and the fixtures need to reflect this price. If you go “all out” on the finishes in this neighborhood you will most likely be unable to recoup your costs. Remember, any area can be good for buying and reselling a property. However, knowing how to fix up the property that best fits the demographics of the area is a key component to maximizing revenue.
2. Partner With A Reliable Funding Source
The importance of a solid funding source cannot be overemphasized. Securing the most profitable property means nothing if you lack the funds to close the deal. Look for a local funding source that communicates well, is easily accessible, and takes the time to answer all of your questions up front. Be sure you know the ins and outs of their pricing structure and timelines. For example: How quickly can they close? What are the upfront costs? Do they offer rebates for early loan pay off? What are the qualification criteria? Do they lend on properties in all areas or are there restrictions? Will they lend on condominiums? How much of a down payment is required? Knowing the answers to these questions can eliminate costly errors later, not to mention logistical headaches. Once satisfied with
the process and comfortable with the fees, take the time to get qualified before you start making offers on properties. A bit of due diligence up front can make all the difference to your investments property’s bottom line.
About the author…
James Dainard is on of the founding partners of Invest Now, LLC, the largest wholesale property company in Washington. He has been buying and selling real estate in King, Snohomish and Pierce county for the past five years. He graduated from the University of Washington Business School with a focus in Finance and Marketing. Over the past few years James has been actively working directly with investors purchasing real estate, providing them with multiple exit strategies and supplying them with the various different lending sources.
REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at [email protected] and be our guest for free!”