It is really important who you know in business and so if you are considering becoming a professional Fix and Flip entrepreneur, it is essential to start building a network of reliable partners. The high return of investment associated with ventures of a kind (the average profit for a Fix and Flip house for 2019 is $63,000) sets the US real estate market as a highly competitive field hence a quick response to available opportunities is needed and having the right support is critical.
After you find the right property to transform, you have to develop a timeframe for the construction process and assure deadlines will be met along the way. To begin with: you need to have some cash for down payment available: at least 30 % of the purchase price of the property is required at closing. If you take a private investor Fix and Flip loan to purchase/ rehab the building, generally, you will have 12 months to payback your bill, which means you will need to complete the construction/landscaping work, find a buyer and finalize the transaction in one year. Additionally, you must organize a system to document all affiliated expenses/costs and supervise the rehab progress in person. Once the renovated property is sold, you should evaluate the project and calculate the profit. It looks like a lot to handle, yet, the quick payback of Fix and Flip ventures is worth it. The five most important people that will help you succeed are:
- Real Estate Agents
They will assist you with finding the right property for the next venture. Of course, you should be checking the local listings for “For Sale – By Owner” classified ads, yet real estate agents will keep you posted on new deals. Also, after the property is fixed, it can be the same real estate agent that will resell it for you.
- Appraisal Agents
After you find the right place, it is vital to assure your investment is worth the price and receive an estimate of what the After Repair Value (ARV) of the renovated real estate asset will be. The appraisal agent will consider the condition of the house, the current microenvironment factors, the value of similar properties in the area, etc. and advise via report what their expertise opinion is.
- General Contractors
Next step of the process is to determine how much time it will take to renew the building and calculate the rehab/labor expenses. If you are handy enough to fix the property yourself you may need help just with certain things as plumbing or electricity. Prepare a list with insured and licensed contractors you can count on or the job not done on time may cause headaches. Well in advance, define a timeframe with each contractor, supervise the progress of the project and follow if the agreed deadlines are met. Renovation process need to be time efficient and cost effective, still no sacrifices with the quality of work shall be accepted.
- Accountant/Bookkeeper
Once, you calculate how much the rehab of the building will cost, it is a good idea to discuss with your tax accountant how the estimated profit will affect your tax return. Profits from Fix and Flip ventures are generally taxed under the short term capital gain rule as the asset is sold in one year from its acquisition and are taxed at the same rate as your ordinary income. The tax accountant will advise what to expect in the face of tax liability so you can finalize your estimated expenses/costs and conclude if the “squeeze is worth the juice”.
- Loan Broker
Last, but not least comes your loan broker. After you have found the right building for your investment and have calculated the potential profit, you will need funds to proceed further. The loan broker is the one who will make sure you will receive money quickly so you can make things happen. Generally, brokers charge from 1 to 3 points for a funded transaction and usually you can expect a bank transfer in 7 to 10 business days after agreement.
