Are you speculating on or investing in property?

The usual tactic to invest in property is to wait for the ‘right time’ to buy, and hold back until the market is primed for growth.

It makes sense to do that— we were taught that buying at a higher price means:

  1. you’ll need higher capital,
  2. it will take longer to breakeven, and
  3. you run the higher risk of incurring a loss if the market declines.

But of course, waiting for that opportune moment isn’t a walk in the park. Not even Warren Buffett, the world’s most successful investor, claims that he can predict when the property market will boom or bottom out.

With so much focus on market value, people tend to become speculators who plan for the short term, rather than investors who plan for the long term.

The reality is, even in a down property market, you can still invest and make money if you have a strategy that supports your success.

We’re not suggesting that looking into the market isn’t a well grounded method. It is something you should pay attention to, but relying on it completely is wrong. 

Whether the market is strong, steady, or declining, having a strategy will help you manage your investment and turn it into a success.

Speculator vs Investor

Speculators and investors do the same thing on the surface: they buy, they sell, then wait for maximum profit. What differentiates one from the other is the method used in decision making.

Speculators are basically financial gamblers who take higher risks in the hopes of reaping higher rewards. They mostly rely on property prices to determine whether it’s good to invest or not. 

Investors, on the other hand, have a more structured way of making money. While investing always entails taking risks, investors are better at weighing up their options and planning for the best course of action.

How to identify what you are

Speculator

Do you depend mostly, if not solely, on external factors when deciding when to buy and sell property?

Do you take into account and rely on property prices, government incentives, etc. when making investment decisions?

If so, then you’re likely what’s called a speculator.

Speculation is buying an asset, hoping that it will become more valuable in the near future. This is a short term, not to mention incredibly risky, way of deciding when and where your money goes.

Speculation can be and has been effective in reaping great rewards to some, but don’t forget that “high risk, high rewards” also means a much higher chance of failing.

Those who succeeded are often just lucky.

Only taking these factors into consideration means that you’re gambling your money on something that’s completely out of your control. No one can predict the market, so one false move could snowball into monumental losses.

Speculation is a game of luck for the most part, so if you want to ensure that you get handsome returns for your speculations, maybe consider investing instead.

Investor

Where speculators hope for high rewards in the short term, investors consider their gains in the long term.

What investors do is apply risk management to making investment decisions. 

Investopedia defines risk management as, the process of identifying, analysing and mitigating uncertainties in investment decisions. 

Investors take precautionary measures to reduce or curb the risks they identify as much as possible. They don’t rely on elements that are out of their control. Rather, they find ways to make sure that their property will still be bought, after thorough planning.

Investing is buying a property at a good price, renovating it to increase interest and sell-ability,  and repeating the process.

If you buy a property in a desirable location and beautify it to make it as presentable as possible, there will always be potential tenants willing to buy or rent despite the higher price.

How investors gain profit regardless of the market trend

There are three market trends, namely, the flat market, the growth market, and the declining market. We are told that it is ideal to invest when the prices are at their lowest (declining market) for the highest ROIs, but that isn’t always the case.

Flat Market

The flat market is the state of the market that’s stable. Supply and demand are neither too high nor too low. In a graph, it would be represented by a plateau phase, hence the term ‘flat’.

So imagine investing when the market is flat. You buy a property at X (where X = $50k). You spend $25k on renovations. Then the property sells at Y (Y = $100k). You gain a profit of 25%, which is very good.

Growth Market

In this trend, the market is expanding; more companies are entering it, ready to do business. They buy new plots of land to develop to accommodate and reinforce high demand.

A higher demand equates to a higher price. And during this period, we are told that buying for investment is not the best option, because you might lose more. But that isn’t always the case.

Taking the base prices from the earlier example, picture yourself buying a property at X+20% ($60k) as the market is growing, then spending $25k on renovations. Because of the price hike, your property is now worth Y+20% ($120k). If you manage to sell at this rate, your profit will be almost 30%. An excellent gain.

Declining Market

During this trend, there is little demand for property. People don’t feel like they need to buy, and it could be due to various factors. Maybe there’s no space in the area to build more apartments. Or maybe a real estate company cannot incur profit anymore to support themselves, so they choose to buy out of the industry. Or, people really aren’t looking, for whatever reason.

Lower demand means lower prices, and normally, this would be the best time to buy an investment property.

So you buy a property for X-20% ($40K). Assuming cheaper costs (due to recession), you’d spend a bit less on renovations (say $20k). Now, your property is worth Y-20% ($80k). You’ll get a profit of 25%, or 20% if renovations aren’t cheaper. Which is still a great return.

Why our mindset has to change

Based on all these scenarios, you can see that investors will still have a substantial profit no matter what the market trend is. In fact, if done right, it is possible that investing during a growth market can even lead to a higher ROI, as per the example earlier.

Rather than leaving buying and selling to matters of chance and luck, having a concrete plan to make your property an attractive purchase regardless of its price will secure your desired gains and lower your chances of losses.

How to invest in any market at any time

Having a well thought out strategy is the only way to remain in control of your investments. It’s just like any other business. If you don’t plan ahead carefully, you have an amplified chance of failure.

External factors like exchange rates and property prices are factors no one can accurately predict. You want to rely less on those factors and instead focus on what you can change and control.

That’s why we put together a strategy called S.T.A.R.R to ensure you invest in US property with confidence. 

Tempting as it is, using speculation as a means to gain huge ROIs from your property is not advisable. Not only are you gambling by doing so, you’re also only giving yourself a small chance of winning. 

Property investments are not supposed to be a matter of instant gratification. For you to thrive in the market, you want to be an investor who plans for the long term. You will reap better returns, and you have a much higher chance of getting great results the more properties you invest in. 

Ultimately, what happens in your investment journey, good or bad, is up to you and how you plan for it.

By focusing on factors that are under your control rather than solely on market prices, you leave less of your probable gains to chance and instead have a traceable method that you can change and adjust to further assure your success.

To learn more on how to shift from being a speculator to a serious investor, why not give us a call?  We can help map out a strategy that will work for you in any market – book your strategy call here >>>https://stardynamicinvestments.com/booking-page

Everything We’ve Been Taught About Property Investing is Wrong

You read that right.

We all know how the formula for property investment goes:

  1. Buy property.
  2. Wait for the demand to increase.
  3. Rent or sell.
  4. Profit.

It’s been tried and tested over decades and many people have testified to its success. But hear us out when we say that this plan in Australia is a recipe for disaster.

Yes, it was possible to buy one house, start an investment journey, and get a return greater than you imagined. But that was in the 80s and early 90s, when house prices were much cheaper compared to now.

Property prices in Australia have skyrocketed since then, and people are struggling to get even one foot in the door with how dangerously expensive property is, not to mention how saturated the market for it is, too.

That’s why 70% of Australian investors buy one property and never do so again. You’d think that if such an investment was a surefire success, they would have done it more than once.

So, what you’ve heard all these years no longer works. The media and ‘property experts’ will tell you otherwise, of course, because methods that have been proven effective are assumed to stay as absolute truths.

But times are changing along with our economic climate and so should our mindsets on where our money should go.

Negative gearing

Gearing is borrowing money to buy an asset. Negative gearing means that the income you make from that asset-turned-investment is less than what you’ve spent.

In other words, it means you’re making a loss.

Many will tell you that negative gearing can work. Australian law even has a benefit for those going through this loss— it allows investors to deduct their losses on an investment property from their taxable income.

Those who invest in property normally plan for profit in the long term, so negative gearing will work if an investor can limit their losses until the opportune moment where its value reaches a point where it can be sold for good profit.

In theory, again, it should work. But remember how 70% of Australians buy property once and stop there? Of that number, only 3.4% of properties are profitable.

That small percentage shows that leaving your investment to such a high risk doesn’t always lead to high rewards. With how expensive property is today, you’ll be borrowing and investing so much money with the uncertainty that people will even rent it, let alone buy it.

That short-term loss will lead you to a long-term one.

Paying too much for a property

Ever been excited about buying something that you get so impatient with the whole ‘searching for the right one’ phase? It becomes a matter of “What’s the best I can get ASAP?” because you want it, and you want it now.

The same happens when buying property. You’re finally ready to buy a new house. This is the first one you’re investing in and you’re excited by the idea of getting that huge return of investment (ROI) someday. So you jump from house to house as your real estate agent tries to convince you of their best deal for each property.

And because your excitement builds and builds, it doesn’t take long for you to choose the one you think is the best out of all the options you have.

The outcome? You overextend your budget and end up buying what you can’t afford, with the mentality that it’s fine because you can pay it off later anyway.

Imagine finding out not long after you’ve bought that property that there was a better deal elsewhere. It was a bigger, newer house and you could have bought it for much less.

That’s got to hurt.

The truth is, no matter what we do, there will always be opportunities that we don’t find until it’s too late. What you do to minimise this, is to plan better and to take the time to explore as many options as possible.

Large developers want money

Large property developers are more concerned with getting their builds bought, rather than helping you find the right property. And you can’t blame them: Real estate is business, and business means money.

Picture this: The large developer promotes that they’re going to construct a new apartment. They start selling the units and promise to hand them over once the construction is finished. You buy one and you’re paying for a product that you don’t have yet.

These are big money sinks and it will be years before you can get your money’s worth.

If you don’t manage to pay continuously, you’ll get slapped with penalty payments, or worse, you might not get your apartment and the money you’ve spent on it will be almost impossible to retrieve.

All of this is happening while you pay a huge mortgage that they use to fund the actual construction, and there’s no equity because they didn’t put any of their own money into that building.

So essentially, these developers are making money before you even buy from them. All you’re doing is funding their next big project.

Why new thinking on property investment is needed

3.4% as a success rate for these one-time investments is definitely painful to look at. If so few investment properties are profitable, something has to change.

Negative gearing and overextending sets potential investors up to fail, but large developers don’t really care about that, so they can’t and won’t help you.

And you don’t want to invest in something if you’ll end up having to cut your losses.

There will always be a better option for a better price. Don’t let your excitement allow you to jump the gun, when you could have settled a better negotiation.

How a US investment strategy can result in 10 properties within five years

Our solution to all of this? Invest in the US.

Previously, we explained how for the price of a deposit in Australia, you can buy an entire house in the US. And it can be debt-free.

So if your purpose for buying property is for investment, then it doesn’t necessarily have to be in Australia. Consider your options abroad.

But of course, this shouldn’t be done without a concrete plan of action. That plan is a five-step process called STARR: Strategy, Team, Acquisition, Renovation, Realisation.

Strategy. Having a plan should be the very first step in starting any business. That includes researching where you’ll get the best value for your money. Looking abroad is extra work, but if you want your investment to have a high reward for lower risks, then getting into the nitty-gritty of your plan is something you can’t simply overlook.

Team. Someone has to be present on the other side of the world to oversee things for your investment. The good news is, it doesn’t have to be you. Build an ‘on-ground’ team to do the inspections and deal with the tenanting for you in the US. Find the right people for the job, and you’ll be able to rest easy, knowing that your property is being handled well.

Acquisition. Buying in the right place is important, but buying at the right time is just as crucial. To plan for this, remember the 3Rs: Research, Review, and Redo. Research places in the US that prove to be high-growth locations. Review as many reliable sources as you can to make sure that you’re eyeing the right location. Redo these steps until you’re comfortable with the location, price, and property to meet your requirements and suit your strategy.

Renovation. To find desirable tenants for your property, it might need a makeover. Of course, if you want to attract potential renters or buyers, your property should look its best. Look for reliable contractors to help renovate. With your set team, this will be easier to manage.

Realisation. Realise your cash flow or sale. Properties in the US consistently bring a net ROI of 10-12%. But this can only be a success if you follow the first four steps of the process.

Through the STARR method, you could have a portfolio of up to 10 properties within five years.

If investing in Australian property is an option for you, great and good luck. But for most, it might not be the best idea – at least, not in this day and age where the cost is too high and people can barely afford a decent place to live. What you’ve heard from the ‘property experts’ simply doesn’t apply anymore, and you run a much higher risk of a failed investment.

Investing in the US, where the cost of one American house equates tantamounts to the cost of one property deposit in Australia, is ideal. Following the STARR process, you’ll be able to invest smartly and gain a higher ROI with less risks as opposed to investing in Australia.

To learn more about the benefits of investing smartly in the US, why not attend our live webinar on July 21st. Reserve your seat here.

Why having a team when investing is important?

I have a lot of people ask me when looking to get into the US market, what is the first thing you need to do to get started? My answer is always the same…

Build your team on the ground!

This is, I believe, the most critical and important step to do and do well. If you are looking to purchase an investment in your neighbourhood, or a nearby suburb, or even a nearby town, you are able to visit the property, do the walkthroughs and inspections, query the agents, etc yourself. Not such an issue here, you can do your own due diligence and trust yourself.

But if you lived in Sydney and wanted to buy a property in Brisbane, you would need to ensure you get a good agent over there who you can rely on to give you the right information, ask the right questions for you, I would even recommend finding a good buyer’s agent in that area to work for you, wouldn’t you agree?

Same with the US. There are a few people who are important you find good ones and people you can rely on.  Without this, it can be almost “pot luck” to make sure you have a good deal.  You can only do so much due diligence from afar, without walking the property, knowing the neighbourhood, checking comparable values in the region, etc, you are gambling at best…

Even here in Australia, you are going to need an accountant you can trust, foreign exchange company to enable you to convert funds to USD (don’t use the big banks, they will gouge you with fees!) possibly even a solicitor or notary (like a Justice of the Peace for US documents to witness signatures etc)

In the US it’s even more important… You will need Realtors, Wholesalers possibly, home inspection companies, Title company, general contractors, insurance agents, property managers (oh my, an important one!) US tax agents to lodge tax returns for you; the list goes on…

A lot of this you will need later throughout the process and won’t need some of these suppliers until you have purchased a property, but it’s good to understand the process of finding them when the time comes.

It’s also a good idea to set up a US phone number.  Now this doesn’t have to be getting a plan or SIM with a US phone provider, but there are some companies that offer this on VOIP methods, Skype is one of the best.  It can make it easier for the US team to contact you as often, they can be put off with calling overseas numbers.

Without building this team, this support network, you are really gambling on your investments.  You might come across a good deal, good property, but its also likely there will be issues you were not able to see from halfway across the world.

Investing globally is not any harder than locally, just takes a different approach to get it right.  You need to be able to find and trust others instead of always relying on yourself.  I always look at investing as a business, the treat is as such and it will treat you well.  Become that leader, that manager of people and your business and investments will thrive…

The Renting Revolution – Why more Americans are turning to Renting…

In the U.S., the attitude towards renting versus homeownership has been changing for years now. With this year’s tax reform shifting and reducing some of the benefits of owning a home, we’re seeing more and more change in the narrative around purchasing a home versus renting debate. And everything points to good news for real estate investors.

Historically, owning a home was a crucial part of the American dream as it is here in Australia. As a mark of success, you hadn’t “made it” until you owned a home. Even recently, homeownership was still a goal, and the only reason the real estate market was lagging was due to financial woes in other areas that caused first-time homebuyers to put off their home purchases.

Renting, by and large, has been seen as an inferior option, often touted as simply throwing one’s money away year after year, versus actually investing in a long-term asset.

But we’re seeing the conversation change.

Freedom and Flexibility of Renting

Traditional wisdom tells us not to buy a home unless we plan to live somewhere for five years or more. Renters are understanding more and more about the commitment of buying a home and how it can affect their lifestyle. Today, people are less inclined to commit to careers for 20 or 30 years, are more likely to work from home, and value mobility and flexibility. People now are more mobile than ever and actively choose to rent because it fits their lifestyle.

When we look at modern millennials (who are now in their 20’s and mid-30’s) we see people who are highly connected, community-minded, and…not all that interested in buying a home, even if they were able to save for the down payment.

Realising How Costly Home Ownership Really Is…

Over the past several months, Forbes has published several articles on the shifting opinions on renting and homeownership in the US. In one such article, it points out just how costly homeownership really is in a variety of ways. Typically, most Americans have only considered the mortgage payment and compared it to their rent payment when comparing what it costs to be a homeowner versus being a renter. We make the same mistakes here in Australia too.

But the article points out this is not an apples-to-apples comparison.

Homeowners have to worry about many one-time costs like closing fees, Realtor fees, mortgage origination fees, and lawyers’ fees, on top of costs like buying new furniture, moving, and purchasing equipment associated with homeownership, like lawnmowers.

Then there are the ongoing costs: property taxes, mortgage interest payments, utilities, insurance, possible homeowner’s association fees (like our body corporate fees, and more.

While many are quick to argue that a rent payment is flushing money down the toilet, the costs associated with buying, owning, and selling a personal residence are high for most Americans today.

When you take into account the increasingly transient lifestyle of modern families and the uncertainty on the return on investment in owning a home, choosing to buy over renting for its own sake just doesn’t make sense to an increasing percentage of the population. There are far better investments to make than a personal home.

A Renter’s Explosion

The rise of the renter is not just in debate or in public sentiment. It’s very tangible. In the United States between 2006 and 2016, the number of people renting versus owning increased by 5% nationwide. In 22 of the 100 largest cities in the US, “rentership” (if that’s a word?) beat homeownership. See below the top 22 cities in the US where renting has overtaking homeownership! This data is a few years old now, but in fact, it has only got stronger in rental terms…I will source the recent data and post it next week!

4 Steps to a Successful Start in US Real Estate Investing

So you took the plunge. You’re officially a real estate investor! First of all, congratulations. You’ve begun your journey towards financial security — and freedom — for life. If you’re like most new investors, you likely feel nervous along with excited. After all, you made a massive financial commitment. What if it doesn’t work out? What if you do something wrong? You don’t want to ruin your investment! Further, it’s even scarier as its halfway across the world!

If you want to lay the successful groundwork for your investing future, here are a few things every investor must do (besides have Star Dynamic help them on their journey!).

  1. Cultivate your relationships.

Nothing is more valuable to an investor than their relationships with their service providers.  Whether than be realtors, property managers, contractors, title companies or anyone, its these relationships that will allow you to get the most out of your suppliers and your investments

  • Read, read, and read some more.

Never underestimate the value in continuing your education. In real estate investment, the learning curve can be steep. While this is mitigated through knowledgeable and experienced support, it doesn’t absolve you from learning everything you can about your new venture. 

From understanding different investment strategies to becoming acquainted with your investment markets, reading up is hugely beneficial.  Never stop learning, studying strategies, options.  Make sure you have a plan B for your investment should something not go according to plan.

  • Think about the next steps.

One of the biggest mistakes we see inexperienced investors make is failing to plan ahead. If you know you want to invest, that’s great — but it’s not enough to sustain a long-term vision for financial freedom. As the owner and investor, you take control of the trajectory of your investing future. 

What does that look like, exactly? For many, it means setting goals when and where you want to expand your portfolio. It means thinking about both short-term and long-term steps and how to achieve them. This is where you are the most proactive and involved — in shaping the growth and direction of your investment portfolio. 

  • Practice engagement.

Passive investors, above all other kinds of investors, can struggle with engagement. It takes intention and determination to engage with your portfolio and the people who make it all happen. During your first year, be particularly proactive in your engagement of others. Make connections with other investors, both those with more experience and those in your same boat.  Join groups to discuss investing, particularly in the areas you are in; Facebook groups, attend workshops on investing, particularly US strategies; ask questions; be involved.  (check out our Inner Circle coming soon!)

Engagement doesn’t just mean you initiate conversations and relationships with others. It also means you value reports and information surrounding your investments and their markets. Be an engaged investor.

If you follow these principles in your first year of investing and beyond, you are bound for success as a global investor.

For more information on this, and our US Property Investors Inner Circle, contact us now.

Assessed Values vs Actual Market Value

Assessing the value of a home when putting it on the market is affected by a number of factors. There are two numbers to consider when selling: assessed value versus market value.  

In some cases, assessed value and market value may be similar. But in general, the assessed value will be lower than the market value. Each of these two numbers will be used in different ways throughout the course of the selling process. Knowing the difference can help you get a great deal. 

Assessed Value 

Understanding assessed value starts with understanding who is assessing the property and why. Counties (similar to councils here in Australia) employ assessors to place a value on a home in order to levy property taxes on it. The assessor looks at what similar properties in the area are selling for. They also assess the value of any recent improvements, any income you may be making from the property (such as renting out rooms), and the replacement cost of the property if it were to burn down in a fire. An assessor is usually a real estate professional, so they are fully aware of the many aspects that go into the sale of a home.  

Once the assessor comes up with a number, they will multiply that number by an “assessment rate” – a certain percentage in that tax jurisdiction. The percentage is usually 80% to 90%. So for example, if the assessor determines the market value of your home at $500,000 and your local assessment rate is 90%, then the assessed value of your home will be $450,000. 

That sum will then be used by your local government to calculate your property taxes. The higher your home’s assessed value, the more you’ll pay in taxes (again, same as our council rates here in AU) 

Market Value 

The market value of a home is based on market conditions – that is, what buyers are willing to pay for a home, and what a seller is willing to accept. Websites like Trulia and Zillow will help give you an idea of how your home compares to others that have been sold recently, but you need to be very careful with these “estimates”.  Often these estimates are SOLELY based on recent sales and do not take into account condition of the homes, which in the US can vary greatly.  

Other factors will also go into determining market value. The main one is location. How desirable is the area? Are there lots of schools and amenities in the area? 

In terms of the house itself, factors will include the exterior condition of the home, style, availability of public utilities and so on. It will also include the number of rooms and their sizes, appliances, heating systems, energy efficiency and so on. 

Supply and demand will also drive up market value. If there is a seller’s market, anyone seeing your house as their dream home might be willing to offer more. Or alternatively if the property is an excellent investment, you can demand a higher price. 

Its also this market value that you can use to your advantage.  If selling on land contract (or vendor terms as here in Australia) you can ask higher than market value possibly.  If wanting a quick sale, under-cutting the market value can work in your favour. 

Investing in US apartments…Good Strategy or Not

In my opinion, investing in Apartments in the US has always been a good strategy for cashflow. I would like to preface though, by stating what I mean here as a strategy is buying Apartment Buildings…not single units or Condos (condominiums).  Condos often have very high Home Owner Association fees (HOA’s) equivalent to Body Corporate fees here in Australia.  These fees will often eat into your rental returns SIGNIFICANTLY and can often be a disaster for your portfolio 

Apartments are almost a hybrid of residential and commercial real estate. In the US, anything over 4 apartments in a building is classified as a commercial investment, but still driven by residential trends and demographics. Growth or appreciation of apartment buildings can be more linked to the Net Operating Income (NOI) of the building, more like the CAP rate of a commercial property. As much as capital growth in residential, particularly in a large number of US markets is not something you bank on, in apartment buildings, it can be something you have more control over. 

For instance, if the rental returns in an area are rising or if you are able to rehab/renovate some units to increase the rental return, then the overall value of the apartment building will also increase, regardless of whether residential property is softening in the market or not. It’s kind of having the best of both worlds in one investment. If the market in a region is booming and more and more people are buying homes, then house prices appreciate, and often apartments can “rise with the flow”. If markets are softening, becoming more of a buyers market than a sellers market, people get nervous, start selling and renting for a while. Rents can often increase as the demand for rentals rise, which can then increase the NOI of the building and hence, its value. Win – Win! 

Now, there are factors though, you need to take into account when looking at apartment buildings as an investment:  

1. Management 

There is more management involved. Apartment buildings are not for the “passive” investors, or those that want to sit, and forget their portfolios and let them be. With the higher number of tenants involved in one building there is always a lot more management needed, even if you have a property manager in place. 

2. Vacancy 

You always need to factor in a vacancy rate for your portfolio, apartments particularly. One of the major advantages of apartments over houses, is that if you own 1 house and the tenant leaves, you now have a 100% vacancy rate on your portfolio until you are able to tenant the property again. If you have a one 7-apartment building for instance and one tenant leaves, that’s only a 14% vacancy rate. But understand, there is a good chance, particularly if you have a couple of apartment blocks that there will always be a couple of units vacant at any one time. 

3. Affordability 

Apartments can be much more expensive to purchase upfront, and costs such as property management, maintenance, insurance etc can also be higher as these are often treated as commercial investments if 4+ units. Need to ensure you factor in these costs when determining your returns and cash flow. Which brings me to the last point… 

4. Returns 

Returns on apartments can often be higher than single family or multi-family homes. Given the higher management and increased costs, the returns though can be better. If a particular area is giving 7-8% ROI in Single Family Residences (SFR’s) you may find apartment buildings can be 12%+, sometimes even higher! 

If you are looking at a passive rental portfolio, and not afraid of the increase management and costs/affordability of apartment buildings, they can make an excellent addition to a portfolio. We have clients realising returns of over 17% on some apartment buildings and have seen EBIT’s (earnings before Interest and Tax) of over 25% possible – making sure to factor in increases in costs, maintenance and a vacancy rate. 

If this is something you are interested in adding to your portfolio, book a call with us today! 

Never Underestimate the Time and Cost of a House Flip

Some people want to get into flipping houses because it looks like a fast and profitable way to build an income. It can be. But the biggest mistake that people who get into the business make is they underestimate how much time it’s going to take.

They also underestimate how much it’s going to cost. You have to flip a home quickly if you’re going to make money, but the house doesn’t always cooperate with your timeline.

When you start flipping a house, you may run into defects that are hidden beneath the surface. What looks good on the outside wall might be hiding a myriad of electrical wiring problems behind the drywall.

Hidden problems like that are common in almost every house because people don’t often update things like wiring. It’s expensive to have a home professionally rewired.

A problem like that can add thousands to your budget costs. The same thing can happen if there’s a problem with the plumbing. A slow draining toilet or tub is often dismissed as a possible clog but it’s actually a major plumbing problem such as the pipes in the yard are cracked or full of tree roots.

Then you have to dig up the lawn, replace the pipes and then repair the damage to the lawn. Problems always slow down the renovation schedule as well as add to the cost.

The best way to prepare to be thrown off schedule is to budget more time than you think each step of the renovation will take. This way, you build in a time buffer.

Having to depend on other people in a team to help you get the house ready to go on the market can add to the time and the cost as well. Not everyone shows up when they’re supposed to be on the job.

They might arrive a few hours to a day late or not at all. This can throw you behind if you don’t consider working with others can be a time buster. Plus, you might be given an estimate by someone in the team and then it turns out that it’s more work and material than he anticipated so now he has to tell you it’s going to cost several hundred dollars more.

Weather delays should also be figured into the house flip. If it needs a new roof or you need to put in a new driveway, you can’t do that in the rain or in snow. By budgeting in potential problems and overages, you’ll still be able to get done on time and within your budget.

Give us a call to discuss any of these areas!

Renovation and Décor Tips to Help a House Flip Sell Fast

To sell your investment, you’re going to need it to be inviting both inside and out. When a possible buyer looks at the house, he’s either drawn to it or he isn’t. You need make sure that the exterior of the house makes potential buyers want to stop and have a look inside.

The outside renovation is where you can easily go over budget. Making a home have in inviting exterior isn’t expensive. You need to make sure that it’s clean. If the front door is in bad shape, replace it.

If it’s not, then you can clean or paint it. Take out any dated hardware on the door and replace it. Do the same with any porch fixtures like lights, doorbells or faded shutters.

You can put in landscape quite cheaply and put in some flowers either in a bed or in pots. Put up a mailbox and new house numbers. These are all updates that can make a house look more welcoming.

Inside the house, if the walls are in good shape, paint them. It can be tempting to put your own personal stamp in a home when it comes to choosing colors, but you need think what a buyer would want.

Buyers want colors that are neutral. They can imagine a clean slate to work with to put their own personal touches in the room. Stick to soft colors and choose the same if you need put down new carpeting.

New carpet is cheaper to put down than most other types of flooring when you’re renovating but keep in mind that carpet can be a turn off to some buyers. They want the clean look of laminate or hardwood floors.

The areas that can make or break your renovation budget and ones that can help sell a house are the kitchen and the bathrooms. But that doesn’t mean that you need to completely gut the existing kitchen and start over. You can just update what needs to be spruced up by doing things like painting, putting in a new backsplash or flooring and new appliances. If the cabinets are solid but look worn, you can refinish them or repaint them and still end up with a great looking kitchen.

Countertops do matter – so those need to look high end but not necessarily be high end. Update the bathrooms by putting in new faucets and replacing anything that needs to be replaced.

New hardware can make older cabinets look new. Remember when you’re flipping a house not to fix it up like you’d like it to be. You don’t want to spend a lot more money by putting in top of the line appliances or upgrading things that don’t need to be upgraded.

When it comes to décor, make the most of your homes features such as large windows, fireplaces and furniture. Group your furniture so that the room feels bigger in the living room.

Make sure you use soft lighting. This casts a better glow in the room and makes it look warm and inviting. Recessed lighting is good, but careful not to over capitalize depending on the area the property is in. Simply new light fittings or ceiling fans with lights can suffice.

Other areas that are inexpensive but can make a big difference to the overall appeal of the home, are new switches, electrical outlets and fittings. Quite cheap to replace but makes a huge difference and can have the place looking “new” again!

Go minimal if you stage the house. Have fresh flowers on the table and have it set for dinner with nice dishes. Remember to think of the buyer when decorating the home for staging rather than what your own preferences are.

Don’t be afraid to yell out if you have any questions re any of this, happy to discuss!