How to Add Value to Investment Properties

Everyone wants to get the most BANG for their buck when it comes to real estate investing, but where to start can be overwhelming. Luckily, there are a few simple things you can do to accomplish just that and increase the value of your fix and flip property.

Add a fresh coat of paint.

The older your property is the more likely it will need a new paint job inside and out. Stick to neutral colors, as the majority of people may not share the previous owners love of red walls. A dove, oatmeal, or cream color are great choices for inside as they go well with most décor. A lighter color will also make your interior rooms appear larger.

If your interior is covered in dark wood paneling, consider removing it. This trend went out in the 70’s and we can say, “good riddance!” Another option would be to paint over it. Many beautiful renovations choose a soft neutral white to brighten the space. Pair it with a light beige or gray on the walls and it will look beautiful, while staying within budget.

For the exterior, power washing can do wonders and remove years of dirt and grime. If a new paint job is in order, then do not hesitate. You can also consider replacing exterior doors and doing some simple landscaping – at the very least mow the yard. This will help your curb appeal and entice buyers.

Trash the carpet?

Flooring decisions should be based on the condition of the flooring, the price range of the home, and your budget. First, check under the carpet to make sure you do not already have wood floors. You may luck out. If you do, a quick refinish can save you a ton of money.

Consider keeping existing floors if they are in good condition and are consistent with what buyers expect and demand in that particular market and price range. If you do trash the carpet, be sure to select a flooring option that is within your budget and will add value to the property. For example, you don’t want to blow your budget and install premium hardwood floors in a home that you plan to sell for $100,000. Manufactured wood, tile and/or carpet may be the better option.

Upgrade light fixtures.

Outdated light fixtures can easily date your home.  Conduct a quick web search to find more appealing options that will modernize the space. This quick fix can change the entire tone of a room and is well worth it.

Also, consider changing out your light switch and outlet coverings. If your electrical allows for it see if you can install a dimmer.

Upgrade the appliances.

Stainless steel, matching, and energy efficient appliances can help increase the value of your property. If you find dents on the doors to your appliances consider replacing just the door. 

Consider bathroom upgrades.

If you can add another bathroom, do it. Even a half-bath can increase your home value by 10% +/- in some areas. If that is not in the cards, focus on updating the ones you have. Regrouting the tile, removing the tacky wallpaper and replacing old shower fixtures can do wonders for your space. Opt for a new vanity, frame the mirror, build a vanity – the options are endless and all will help the home show better.

Add a bedroom.

Another way to add value to the home is adding bedrooms. This may not always be an option, but there are ways to add bedrooms without adding square footage to the home. One idea is to turn an existing study into a bedroom by adding a closet. This can be an easy alternative that adds significant value to your investment without breaking the bank.

Don’t forget to deep clean.

This should be common sense and part of everyone’s rehab process. A little elbow grease never hurt anyone and if you simply just do not have the time, consider hiring professional cleaning service. Otherwise, a dirty home may be a red flag for prospective buyers who may assume that the home was not well taken care of. Be sure to remove stains from the carpet (if you decided to keep them), make sure your bathrooms are mold and mildew free, clean the baseboards, etc.

Upgrade the kitchen cabinets.

Depending on your budget and condition of your existing cabinets, you may not need to completely replace them. Consider splashing a new coat of paint on them and replacing the door pulls. This simple step will help to update your kitchen in a major way.

Replace windows.

Replacing older windows will give you the chance to update the look of your home. Be sure to opt for energy efficient options, as this will significantly add value to your investment project.

Remember that you do not have to do it all. Chances are you have some major big-ticket items that must be taken care of first.  When considering rehab, especially the cosmetic stuff, always consider your target buyer, location, and budget. If your rehab is in a lower income area you may want to skip the fancy modern light fixtures no matter how good of a deal you get on them. Prioritize and spend money on what matters.

Talk with industry professionals about the right updates for your project. Discussing these options with a hard money lender you can trust will help ensure you make choices that will increase the value of your real estate investment, without blowing the budget. Be sure to include a contingency in your scope of work to help cover unexpected expenses and stick to your budget. Many new flippers get wrapped up in the fun of cosmetic upgrades opting for unnecessary improvements and imposing their personal style preferences. Always remember that your fix and flip property is an investment, not your forever home. Focus on what matters and choose the best renovations for resale.   

House Flipping 101

Whether you’re looking for a new career or just a way to make money on the side, flipping houses can be profitable and rewarding if done right. In 2019 approximately 245,864 homes were flipped in the United States. The median gross flipping profit on home flips in the fourth quarter of 2019 was $62,500. Sounds like a great way to make money, right? You’ve seen it on tv shows, but there is more to learn and understand.

What exactly is house flipping? 

Flipping houses is when an investor purchases a property with the intention of fixing it up and quickly reselling it. Most homebuyers want a move-in ready home, so flippers often buy properties that most buyers aren’t able or willing to renovate. The key is finding the right property and flipping it fast.

It can also refer to purchasing and reselling properties in a market where home values are on the rise. In this case, a real estate investor may spot a foreclosure or low-priced home, purchase it and wait a few months until home prices increase. They will then re-list it at a higher price and sell it for a profit.

Ready to get started? Read on to learn about the important steps to take when starting out.

1. Research a range of markets.

How much money will you have to work with? $20,000 will not help you invest in areas with an average sales price of $800,000. Your budget will help you narrow your options. If your hometown is outrageously expensive, consider investing in areas further away, especially ones with rising home prices and strong demand.

2. Set a budget and a business plan.

Every good entrepreneur needs a plan. What amount are you comfortable investing? How big of a renovation project are you up for? All of these things need to be considered when making your plan.

3. Line up your financing BEFORE you need it.

The best deals out there will be snatched up quickly. Make sure you are already pre-approved and have a lender lined up who can finance your deal before you look at properties. You don’t want to miss out on a hot property with huge profit potential. Investor Loan Source can help you with a fix and flip loan. Visit us online to learn more or better yet, apply online today!

4. Build your network of contractors.

It is important to have a team of contractors that you can depend on. You will likely need general contractors, electricians, roofers, plumbers, painters, HVAC experts and well-rounded handymen at some point while flipping houses. Begin building your network ahead of time to avoid stress and delays – time is money in this business.

5. Find a house to flip.

One of the most important aspects of flipping houses is being able to find good deals. It is important to find homes that are not only priced below value, but with wide enough margins to cover your many expenses. For help finding on-market deals you can work with a realtor. For help finding off-market deals you may want to consider working with wholesalers or beginning a direct mail campaign. Patience is often key when finding houses to flip.

6. Buy the house.

As soon as your contract is accepted, you will want to hire a home inspector to ensure the home is structurally sound and the mechanical systems are in good working order. A thorough home inspection will likely take several hours and is critical in ensuring the home will not come with expensive surprises. After the inspection, walk the home with your chosen contractors so you can properly prepare for the next important step.

7. Renovate the property.

Every month that goes by comes with interest and carrying costs – utilities, taxes, insurance and other expenses. The faster you can complete renovations, the faster you can sell it! Be sure to make repairs and upgrades to the home that will add value to the property. Don’t overdo it. Adding high-end, expensive countertops to an $80,000 property is probably not necessary and could eat away your profits. Stick to your budget and timeline.

8. Sell it!

This step is often the easiest if you’ve made the right renovations and priced the home correctly. It’s also the funnest as it entails reaping the profits of your hard work and planning!

Learning how to flip houses can be overwhelming. Lean on experts – your lender, contractors, home inspectors and realtors. Network with other house flippers. Most experienced house flippers have learned from their mistakes and will be happy to share tips on what to do and what to avoid when investing in homes in need of repairs. Building a strong network and planning ahead will help you set yourself up for success.

Need a fix and flip loan for your investment property? Contact Investor Loan Source at 409-735-6267 or visit our website and get pre-approved today!

Money Maker or Money Pit?

Red Flags to Look for Before Buying Your Next Fix and Flip Property

For fix and flip real estate investors, there’s nothing better than finding that perfect “diamond in the rough” property. It’s like a dream come true. It’s in the perfect location at the right price, but is what we like to call “an ugly duckling.” It has an overgrown lawn, outdated light fixtures, horrible paint colors and lots of small cosmetic items that scare off most buyers. It is by far the ugliest home on the block.  With a fresh coat of paint, a little bit of work and some new light fixtures this house could generate some big profits. It may be tempting to make your move right away, but before you do, be sure to do your due diligence. Look for these red flags that could turn your next real estate investment flip into a big flop.

1. Too Long On The Market

If the home has been sitting for too many months (or even years) on MLS, this could be a sign that something is wrong with the property. Be especially cautious if it is showing pending sales that fell through. This could indicate that previous homebuyers or real estate investors noticed serious problems with the home during inspections.

2. Foundation Problems

Major foundation issues can scare off potential buyers and cost thousands of dollars to repair. Look for cracks in the bricks, walls, flooring, foundation, sidewalk and driveway, as they could indicate some foundation problems. Uneven floors are also tale-tell signs that the home might require foundation repair.

3. Sewage and Draining Issues

Sewage and drainage problems can quickly turn into a bad situation for flippers. Drive by the house after a rain before buying the home. If you see puddles of standing water, the yard may have a drainage issue. Puddles near the foundation are especially concerning. Standing water in the yard and heaved walkways may also be signs of a blockage or break in the underground sewer line. 

4. Roof Damage

Replacing a roof is expensive. A new roof can cost anywhere between $6,000 to $20,000 or more depending on  the size of the roof and type of roofing materials. It pays to check out the roof carefully. Shingles that curl up at the corners, missing shingles, cracked shingles and exposed nail heads are all signs that the roof may need to be replaced.

5. Mold

Moisture leads to mold, which is the bane of every homeowner and real estate investor. Not only can it cause health issues and respiratory problems, but It can be costly to remove. Some mold growth is obvious, but it can also be lurking out of site and be more difficult to detect. When checking for mold in the home, look for water stains on the ceiling, walls and floors – including in the attic and basement. Dark, fuzzy stains and musty smells can indicate there might be a mold problem in the home and should not be ignored when inspecting the home and estimating repair costs. There’s a chance of it returning if the initial work wasn’t done right. Mold elimination should also include fixing the water source.

For many real estate investors, flipping homes can be an enjoyable experience. It can also be very lucrative. Keep in mind that due diligence is one of the most important things to master when it comes to real estate investing. There are hidden costs you need to take into consideration when deciding if a home is a good investment. Some repair costs are manageable, while others may exceed your budget. The next time you are looking at investing in a fix and flip property, be aware of the red flags that can help you distinguish the money makers from the money pits.

Ready to purchase your next fix and flip property? Investor Loan Source, a private lender based out of Texas, is here to help. Visit ILS.cash to learn more or apply now to get started.