Why Investors Should Give “That Old House” a Second Look
Rehabbing or “Fixing and Flipping” is not a new tactic in real estate investment. In fact, there are ample real estate investors who focus exclusively on flipping homes. They do it because they see great potential, but more importantly, because they LOVE to make something better and make a profit at the same time.
In the past, old houses may have looked like too much work to you, but if you were ever even slightly tempted to take on a rehab project, now might be an ideal time. Recent reports on RealtyTrac shows that the end of 2014 brought record high returns on home flips while flipping still held its historic norm of 4% in the market.
Who is seeing the most success with flips?
Those who take advantage of the aging housing market—where there is a dearth of new homes being built—and purchase older, distressed homes, says Daren Blomquist of RealtyTrac. Investors take these homes and give them modern updates and accents, then resell them for a healthy profit.
Why are there more flipping opportunities on the horizon?
First of all, there has been a recent increase in foreclosures. Older homes have been somewhat hard to come by for investors, but scheduled foreclosure auctions increased at the end of 2014, and should add more opportunities to the market in the first part of 2015.
Secondly, there is data that indicates the value of remodeling is increasing. 2014 saw the largest increase since 2005.
How do I get started?
If you’re serious about pursuing a rehab/flip project, here are three basic rules that will start you off on the right foot:
- Sweat the Big Stuff. Meaning, don’t buy a house with a crumbling foundation and a roof that looks like Swiss cheese. A solid rehab project is one that starts with strong infrastructure. Avoid the houses that need big work done to them. They’ll likely be a big headache and a black hole for your investment funds.
- Pay Attention to Location. Sure, you may find a house that looks like a great investment and inspires you to jump in with both feet. But, is it in a good location? Know the neighborhood. Look for those areas that show steady housing values and indicate reliable growth.
- Have a Plan. Flipping a house may sound fast and exciting, but you can’t just “wing it.” Make an outline of the costs and resources at hand. Understand the permitting process AND your own limitations. Research the project and plop it into a timeline. Make allowances for the unexpected, while doing your best to address all potential variables.
Who knows, 2015 might just be the year you end up starring in one of those fix and flip shows—or maybe you’ll simply fall in love with rehabbing . . .