One thing you always want to do is to make sure all your costs are up front before you buy anything. Have your contractors lined up and have fudge factors. Make sure whatever you’re going to fix and flip, you have the figures telling you what you can sell it for.
Typically, if you find a $50,000 house, the first thing you’ll want to do is find the after repair value for the house. Get comps on RedFin.com or Zillow.com, and get an idea of what the house will be worth when you sell it. Talk to a Realtor if you can and figure out what kind of price point you’ll have. Never go across the river, a main street or a highway. You have to stay very local when doing comps. Sometimes, just crossing the street can make a $150,000 difference.
Once you’re sure of the after repair value, figure out your closing costs. In the Aurora area, it’s around 8 percent. Then, put profit into it. We would never recommend buying anything that gives you less than $10,000 in profit, and preferably you’ll have a $20,000 profit minimum to do this deal.
Then, include all the repairs that you’ll do. Get contractors and bids and always have a contingency plan in mind. Sometimes, bad contractors work on your house and you’ll need another one to finish it. Or, you’ll open walls and floors and find unexpected things. That’s why you need fudge factors in your costs.
Don’t skimp or overdo repairs. You don’t need to over-modify because you won’t get your money back out. Do what you have to do to make the property nice, but don’t’ over-improve. You don’t want to put granite countertops in a $100,000 neighborhood.
Calculate your figures and if you’ve never done this before, ask for help. We would be happy to assist you, so contact us at Kirch Property Management.