How to Analyze Your Next House Flip! (video walkthrough of one of my projects)
One of the scariest parts of buying a rehab is feeling confident you are analyzing the deal correctly.
Mess this up, and your project can go from a nice projected profit to way in the hole. I’ve looked at literally hundreds of homes at this point in my career and have gotten comfortable making offers on the spot.
(Check out this series of the transformation of one of the WORST homes I ever bought: House Flipping Transformation.)
Here are a few of the things I always look for when analyzing a new deal:
1. Location is extremely important.
You have to know what areas of town you like to invest in, but you must also get hyper local with your location knowledge. Some neighborhoods have one street that’s a great investment and another that isn’t. Talk to realtors and other real estate professionals if you aren’t sure what area to start in.
2. Structural condition of the home.
The first thing you must look at when you get to a project is the major structural components of the home. (this includes the roof, foundation, and exterior siding and trim). If these are falling apart, there will almost always be hidden problems underneath.
3. The cosmetic condition of the home.
If you decide the home is worth saving, how much is it going to cost to create that “wow” factor? Is the layout easy to live in or will you have to tear down and move walls? Does all the sheetrock need to come or are parts repairable?
4. Exterior features.
Outdoor living and creating a backyard is an important part of any flip project. Ask yourself if you can create an amazing outdoor space with the available yard.
5. Time to do some math.
Add the purchase price + rehab costs + holding and sale costs and subtract all that from what you think you can sell the house for. The bottom number is your potential profit.
(I usually want at least 20% – 30% profit in a deal)
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