How to Evaluate a Fix and Flip Before Contacting Texas Hard Money Lenders
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November 21, 2015sensationalized the rehab and flip business, making it seem like it’s easy cash
for anyone who jumps in. The truth is, you have to have a keen eye for
investing, and know how to evaluate the home before you get started, especially
when you’re using Texas hard moneylenders.
Homes that have fallen into disrepair can be a rehabbers
dream. A seasoned pro can size up a home fairly quickly, and make an educated
assessment as to whether it will provide a solid return on investment after all
the work is complete. This evaluation is often the largest determining factor
in whether someone is successful in the fix-and-flip business, so it literally
pays to do the research ahead of time.
Calculate what the home will be worth after
repairs. To do this, you’ll need to research what comparable homes in the area
have sold for over the past 90 to 120 days. They should be in a similar
neighborhood, have the same number of bedrooms, bathrooms, and square footage,
and also be about the same age. Target an area within ½ to ¾ of a mile from
your potential rehab project.
Consider what the repairs should cost. Some
re-habbers swear by a $20 per square-foot rule when it comes to cosmetic
renovations. However, it’s always wise to bring a contractor on board to verify
your estimates before you finalize things, even if you’re going to do the work
yourself.
Include any contract fees and the loan costs from
your Texas hard money lenders in
your total expense estimates.
How to Tell if a Flip Using Texas Hard Money Lenders will Be Successful
Unfortunately, there are no guarantees when it comes to
rehabbing and flipping houses. Even experts in the industry get burned from
time to time, so you have to exercise diligence, and leave yourself wiggle
room. The amount you offer for the home should be enough that after you pay
fees, repay your Texas hard moneylenders, and cover repairs, that there’s a tidy sum left to reimburse you
for your efforts. It’s wise to build a cushion in when you give your offer,
though if you go too low, you could be denied. Equally, having fast access to
cash may enable you to negotiate a better deal, so take that into consideration
when you make an offer on a property, too.
You should only borrow from Texas hard money lenders if you’ve done the
research and you’re familiar with potential rehab pitfalls.
There’s a big difference between making a calculated
decision based on knowledge of the housing market, and in making repairs with
the hope to turn a profit. Not every rehab is worthwhile. If you’re just
starting out, choose the simplest projects, and include professional
contractors in your budget. You can test your knowledge in rehabs by scouring a
neighborhood, and making your own predictions of what houses will sell for once
they’ve undergone renovations. You may also have better success if you find a
seasoned re-habber and spend some time working as an apprentice for him.
Fix-and-flips aren’t for everyone, and getting started in the industry requires
real estate knowledge, as well as a solid background in home repair and
estimates. Texas hard money lenders can provide the short-term cash you need to make a deal, but you’ll need to have the knowledge to ensure you’re making a wise investment. If you have these things in your own mental toolbox, fix-and-flips can be incredibly lucrative.
Dennis Dahlberg
Broker/RI/CEO/MLO
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
dennis@level4funding.com
23335 N 18th Drive Suite 120
Phoenix AZ 85027
