Making the decision to become a fix-and-flipper is only half the battle - in fact, it’s the easiest part of the battle. The most difficult half is deciding where you’ll focus your property search and what the specific property will be. Of course, you could just run out, find a house that needs fixing up just about anywhere, and get to work - but to ensure you get the highest return possible you’ll want to do your research into various neighborhoods and make sure of these 4 things:
1. Decent Schools
One of the biggest reasons that people - specifically young families - look into certain towns and neighborhoods is that they’re evaluating their school systems. Of course, every parent wants to send their child to the best schools possible, so if your prospective flip property is in a town with a decent school system, you’re in luck! Now, there is a caveat here, and it might seem a bit strange - but it may be difficult to find a flip in a town with the best school system. That’s because those towns typically don’t have many properties available that fit the typical fix-and-flip profile (available for under market value without needing so much work that it isn’t reasonable to make the investment). If you can find a property in a 5-star school system, awesome! But otherwise, just make sure that your property is located in a town with a solid school system, or that there are reputable alternative schools (private schools, charter schools, etc.) nearby.
2. Easy Commuting Options
Next up is the commuting options. Finding a property that fits your budget in a rural area may be easy to do, but selling it after the renovations have been completed may not be as simple. One of the best ways to determine if your fix-and-flip location is ideal is to keep the closest metropolitan areas (where many prospective buyers may work) in mind, and also the options they’ll have for actually getting to work. A reliable public transportation system is typically a great asset to suburban areas, as are roadways and highways that are well maintained and will take commuters right into the city.
3. A Mix of Older and Newer Homes
You may be thinking “why wouldn’t I want to focus on a neighborhood with all newer homes?” or vice versa. Well, the reason is pretty simple. In an area with mostly newer properties there probably isn’t a room for improvement within those homes, and the properties may be priced competitively in those markets, which means there’s less room for profit when you do make your improvements and sell. In an area with mostly older homes you may run into a few issues: the area may not be desirable for those looking within your target resale price range.
Now, neither of these things are hard and fast rules - it’s entirely possible to find a home in a newer area that will give you great returns, or an older home that needs just the right amount of work in an area that’s up-and-coming. Just make sure you take a thorough look at the neighborhood you’re interested in and the currently for sale and recently sold comparisons.
4. Competitive Market
Finally, the most important point (which, to be fair, is kind of a wrap up of all the above points) - make sure that the neighborhoods you are considering are in competitive markets. Purchasing a property that’s in a buyers’ market is great for when you actually purchase it - but it could affect your profit margins upon resale since buyers won’t necessarily be interested in paying more for the upgrades you’ve made. Similarly, a sellers’ market could make it so that finding a property for a price that leaves you enough room for renovations and a profit might be difficult. Ideally you’ll want to be looking in towns or cities where the market is stable across the board and there’s a good mix of all the above features.
And, of course, when you’re making your purchase and renovations you’ll want to be sure you aren’t overbuilding for the area.
When you are ready for your next fix and flip project, let us help you!
This post was originally published Jan 2018 and has been updated and revamped.