If you are a small investor, one or two properties, you may not have the insight of an investor that has a more vast real estate portfolio. Not to worry. Carod Properties embodies professionalism in the spirit of excellence, and as such, we want to make sure every investor has the knowledge to make their small investment strategy just as profitable as the major investor. A few simple methods, before and after purchase, can almost ensure that you make a maximum profit when selling.
Every property investor does not have intentions of long-term investment. “Flipping” is a term that has become synonymous with purchasing real estate with the intention of selling for immediate profit. While the term is essentially what happens, most “flippers” look for property with minor, cosmetic fixes for quick and an often less than substantial profit. While there is profit to be had this way, having a strategy that will garner a better profit and allows for the ability to change your exit strategy, is a different investment strategy altogether.
When you buy a property, only for an eventual sell, it limits what you are able to do and is not always a wise investment. The real estate market fluctuates. What comparables are when you purchase may be dramatically different when you’re ready to sell; and, not always to your benefit. For example, if you purchase a home for $150,000 in March with the intention of putting $20,000 into renovations and upgrades with a 30 day timeline, all-in is $170,000 plus closing costs. Your break even could be $185,000 or more. However the market shifted, and the homes in the area that were all selling for $200K+ are now 10-15% less. Now, you can’t sell without losing money. A flipper would be lost because they only planned to carry the mortgage until they sold…quickly. A different investor, although they want to sell, will set themselves up to still make profits. To do that, you have to, again, make wise decisions before and after purchase.
A few things you can do, to hopefully prepare for every eventuality, to sustain profits in the interim if unable to sell or maximize your ROI (Return on Investment) upon sell, are:
- Tried and true method of buying the worst house in the best neighborhood, works more often than not. The ugly duckling in an area with great schools, parks, proximity to entertainment, access to public transportation or freeways, is going to almost always give you a great bang for your buck on sell once renovated.
- Outdated=unsellable. Fixtures and subpar materials, even if once quite popular, are dealbreakers! Shag carpet, brass fixtures, linoleum, rundown elements are sometimes easy fixes that absolutely need to be addressed.
- Bathrooms are like gold. Fixtures, dual vanities, separate tub & shower, and square footage are like a license to print money. Don’t skimp. Also if the property is perfect in every way but only has one bathroom, the investment of even adding a half bath will be well worth it when it’s time to sell.
- If bathrooms are like gold, kitchens are platinum! It is being seen more and more, that even a buyer that doesn’t cook, will pay for a quality kitchen. Quality translates into stone countertops, tile floors, stainless steel appliances, and more. It may sound crazy, but it’s true. What does a “take-out” king or a “domestic goddess” that specializes in mac-n-cheese and chicken nuggets need with a chef’s kitchen? It doesn’t matter if it doubles the amount of your investment to make it happen, do it!
- Curb appeal. One simple thing to consider. If a buyer won’t even go inside the home because of the exterior, you’ve lost a sell before you’ve even begun. From the curb in the front to the fence around your backyard, all require attention.
When fully considering sell of a property, investing in the best upgrades maybe the only time it is advisable for a potential rental. With intentions of only renting a property, you’re advised to take personal out of it, forget what you would want in a rental, and just make wise decisions for potential constant turnover. However, when you may be renting in short term, waiting on a market shift, your renovations need to be made with understanding of what will get maximum Return on Investment at the time of sell. Carod Properties is here to help you maximize those profits, just call.
