MDI West Properties’ Photo: 879 Regal Road, Berkeley CA – SOLD 6/24/2015
What makes a house ‘The One’?
Is this market a desirable area?
In a previous post we’ve talked about what makes an individual house marketable in a neighborhood. But just like a house is not an isolated object, a neighborhood is not an isolated area, and its important to look at the context of your community in order to determine which area is the best place to concentrate your attention. Is there a school district that is particularly sought after? Where is this area in regards to major employment centers or amenities? Your town has a sweet spot and a good flipper will target their search to these areas. Also, take into consideration what market areas your city is making improvements to as this may be the new “up and coming” neighborhood for home buyers.
After identifying the area to search, it’s time to start narrowing down neighborhoods. A neighborhood that fits in that target area, and more specifically a neighborhood that fits your budget. Once you do, its time for the legwork, actually finding the house. Find the houses that need upgrading. Have you found some good candidates? Refine that selection even more.
What can we afford?
A rehab budget might be one of the more important subjects in your model, but obviously it’s not the only one. The holding costs, taxes, insurance and permit fees, and marketing costs all need to be taken into account. If you go too big on a rehab budget you maybe shooting yourself in the foot later down the road. This is where you can work with the home inspector and begin to bring in other members of your team, such as your general contractor, to get nitty gritty with the numbers and set realistic expectations for what will be profitable.
What can our team handle?
What is, realistically, the worst case scenario you can handle? The easiest way to think of this is in terms of how much money you can afford to put into a rehab but it also comes down to skill. For example, the pricing on a rehab budget might look good – but if you need to get city permitting and hire architects and structural engineers to fix problematic areas you have no experience in, it might be best to move on with a house whose renovation requirements are a little more reasonable.
And Finally – Is it something people want?
This simple question is a central concept and needs to be revisited again and again with each new factor you encounter: Is this property something people want? Is it equipped with the features buyers are looking for in this area? Does it have the curb appeal to stand out? These are just some of criteria of a successful flip, and must be revisited at each level, from research to resale. The better you are able to distinguish what people in your region are looking for in a home the more successful your business will be.
What are your tips for finding the best properties to flip? Leave a comment below!