Go / No Go: A key to a successful prospect: Will it sell quickly to a homebuyer?

Discussion in 'Should You Do This Deal? Or Not?' started by Mary, Mar 12, 2015.

  1. Mary

    Mary Mary Hirsch (Admin)

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    One of the key factors for choosing a successful real estate investment project for a rehab and flip is a simple imperative that relies on the most basic market information:

    At the end of a quick rehab, it must sell promptly to a homebuyer, or to a rental investor/landlord.

    That’s it. That’s the whole secret.

    So, how do you know what will sell quickly – and what doesn’t? And why is a quick sale so important?

    First, why time is money in real estate investing, perhaps more so than in so many other types of investing:

    The monthly carrying cost of the property eats up profits while waiting for the property to sell!
    • Utilities and taxes.
    • Required yard maintenance and seasonal weather risks.
    • Monthly lender interest costs.
    • The longer construction goes on, the more expensive it tends to be.
    • You need the cash out of the sale for the next project.
    Cashing out ASAP is vitally important. Projects rarely become more profitable the longer they go on - it is usually the other way around. And, the project is tying up cash.

    The key to making substantial profits in real estate investing through flipping properties is to do as many profitable projects as you can in a given period of time, and that requires cash out of each project to finance the next project.

    What sells quickly?

    There is an easy answer to what makes for quick and easy sales – and that is the middle of the bell curve for recent sales in the area. Whatever is average - that is, what most homebuyers or rental investors are choosing - in an area that is selling.
    • Price
    • House size and configuration (bedrooms, baths, etc.)
    • Yard size and landscaping
    • Appearance and overall condition
    • Interior features
    • Location
    The market has already told you what is selling, and what isn’t. Look at recent sales for information for what makes up the most desirable set of characteristics for homebuyers in this neighborhood. Let that guide your plan for what you should include in your rehab work, and also what you should leave out.

    What DOESN’T sell as quickly? What may even require a price reduction to move more easily?
    • Oversized house for the neighborhood.
    • Undersized house for the neighborhood.
    • Too close to noise; too far from a commuter route.
    • Anything that isn’t what the typical homebuyer is buying: corner lot; odd-sized lot; awkward floor plan; etc.
    When it comes to properties with a bit of 'extra character' that makes them different, someone will buy this house at the right price ... eventually.

    As a real estate investor in flip properties of any type from residential to rural, your goal is to do the project in as little time as possible, get your cash out and move on to the next project. Do this by choosing projects that targets the largest segment of the market and the quickest possible sale.

    Keep an eye on Brazos Valley Investor for more informational articles to come.

    Add your comments and questions below!

    As an investor, what types properties do you avoid like the plague?

    Generally speaking, what is a key characteristic that is likely to make a flip property a winner?

    What question would you ask other investors about choosing successful flip properties?

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