Mark Twain famously said, “buy land, they’re not making it anymore.” This sentiment has been the driving force behind people who successfully flip a home for a profit. While it can be a good way to earn money on an investment, there are also some items to consider to avoid losing money.

Getting the right property, correctly estimating repair costs and sales price, and lining up the financing for the purchase and renovation are all vital to making sure this kind of investment is profitable.

Finding the right fixer upper

For people that want to flip a home, it is very important to understand that buying a home at a price which will allow a profit is the most important factor. Paying too much to acquire the property is a common error made by new investors.

Homes that are typically ripe for flipping are well priced, structurally sound homes in desirable locations that need modern updates.

Location, sought after features (such as number of bedrooms and bathrooms) and price point should be your top priorities when searching for a property within your budget.

Do the math

Buyers need to look at 3 things; initial purchase price, renovation, or repair costs, expected sales price.

It goes without saying; the purchase price needs to be as low as possible. Talk to your real estate agent and discuss if the home is aggressively priced for the current condition or if the owners may be willing to negotiate a lower price than the advertised sale amount. If the current owners are simply holding on to the property in hopes of getting full price, it may be a waste of time to try and get a better price.

Realistically Estimating the Costs of Purchasing a Fixer-Upper Is Important

The repair and renovation costs can be tricky. A buyer must make sure that the offer includes a thorough home inspection prior to closing on the deal. This will allow the buyer the chance to hire an inspector and determine exactly what is wrong with the home and get written estimates on the repairs. Overestimating the repairs and renovations can also insure that the deal will still be profitable.

Finally, the expected sales price needs to be realistic. In order to get an idea of a good price, your experienced real estate agent who has worked extensively in the area will give you an estimate of an expected sale price based on current market conditions and recent sales prices of similar homes in the area with an expected sales price after your renovation has been completed.

Getting the money for your fixer upper

Acquiring the money needed to buy the home and pay for the repairs can be challenging. BEFORE you start your search discuss your plans to flip a home with your mortgage specialist to ensure that you can not only purchase the property but can pay for the necessary repairs.   

Purchase price plus identified renovation costs (repairs may include replacing the cooling & heating system, replacing the roof and gutters, adding new windows and doors, repairing, or replacing the flooring, light fixtures, or upgrading the kitchen or bathrooms)

Be sure not to "over renovate" for the location, size and price range of the home. The quality of your finishings should stay in line with the price range you will be selling in. If it is an entry level home, you may want to install laminate counter tops instead of granite and vinyl flooring instead of hardwood. HIgh end finishing when it isn't required is one of the fastest wayto blow your renovation budget.

The estimated value of the home after repair

Summing up how to purchase and renovate a fixer upper at a profit

With a realistic approach, and good financing, buying a home to flip it is a viable way to make profits in real estate. It takes good planning and working with a qualified mortgage lender, experienced contractors and a knowledgeable real estate agent that can provide the right guidance for an investor.

When a home listed for sale expires off of the market without so much as an offer there are a number of common reasons as to why that happened.  Some of the causes of having an unsold home are the responsibility of the real estate agent if there is one involved.  Other aspects of selling a home are done in coordination with the real estate agent but is the primary responsibility of the home seller (insisting on setting the listing price too high for example).  If a home seller still has in mind the goal of selling their home this list of six common reasons why a home does not sell will help home sellers get back on track and get their home sold.

1.  Pricing

Overpricing is one of the main reasons a house will not sell.  Homebuyers are looking to get the best value for their money when buying a home and go in fully informed with regards to home prices and features.  Regardless of how many upgrades, add-on features a home has if the price is not in line with other homes in the neighborhood it will not sell.

Many neighborhoods have a tendency to have similar houses, similar quality and design.  If one house in the neighborhood has been upgraded that does not necessarily mean it will be able get a premium price for that neighborhood.  The upgraded home may be sold for a little more money than other non-upgraded homes in the neighborhood but it will not be that much more.  The average price of a home in the neighborhood becomes a point where any home priced higher must show the true value through upgrades in order to entice a buyer to make an offer. 

Initially buyers will be looking at a home location, bedroom/bathroom count, square footage, and amount of yard space.  Families with children may also consider school districts, proximity to parks, shopping and more.  Once buyers find minimum criteria for a home in their price range homes with additional amenities might sway them more towards making an offer but only if those amenities do not represent a significant price premium that will not fit within their budget.

The best way to obtain accurate pricing for selling a home is through a Comparative Market Analysis (CMA) which compares recently sold homes that are similar in size, features and location to the home which is to be sold.  Other factors such as home condition, age of the mechanical systems and more should be taken into account when setting a listing price.  A home with a less than five year old heating and cooling system will obviously have a price advantage over a home that still has its original 25 year old gas furnace with only window air conditioning units.  Home sellers need to price their home properly according to home condition and similar recently sold homes.  Home sellers also need to be ready to adjust the price as buyer feedback comes in regarding the home’s condition and pricing.

2. Marketing

With pricing of a home being one of the major marketing factors, if that is done right and a home did not sell then the home seller should consider whether the marketing was as effective as it could have been. Over 90% of home buying begins online and the marketing must be most effective here.  Appealing high quality photos and videos should be taken of the home in order to provide the best presentation online.  Prior to taking photos and/or videos the home must look great so that the pictures look great.  If high quality cameras are not being used to capture key rooms and features of the home, homebuyers will not be drawn in and definitely not want to visit the house in person.  Lack of interior and exterior pictures send the message that there is something to hide in the home.  Blurry, dark, unfocused pictures are eye catching for the wrong reasons and will hurt the marketing presentation of a home.

The days of putting a sign in the front yard of a home and listing some information on a few internet websites is LONG gone and not a  marketing plan.  The idea for home marketing should be to get the home in front of as many relevant internet homebuyers as possible so the right buyer is aware of the home.  Blasting a home for sale around the world is also not helpful since a majority of your buyers already live close by to your home.  Targeted advertising through Google, Facebook, Instagram, linked in and more should be part of the marketing strategy for selling a home.  Is your agent using the full power of the Internet to continuously market your home to the right buyer so they are ready to come in and visit in person?  If not then this is an easy way for your home to slip through the cracks and never receive any offers.

3.  Show Ready Home.

A show ready home means the home is properly cleaned up and prepared so that when homebuyers come through they can see themselves living in the home.  If a home has custom collections, personal pictures, unique decorations or unique paint colors/wallpaper on the walls that will serve more as a distraction for homebuyers, these itmes need to be taken down and packed away so the home has more of a neutral appearance.  Non-traditional colors for walls should be repainted in neutral colors or if outdated wallpaper is present the wallpaper should be removed and replaced with neutral paint.

While no home is expected to be perfect, plans should be made as to how to quickly clean up a home so that when buyers do come by the home it is presentable.  Clutter should be packed away so as to not make closets or storage areas look small and cramped.  Any minor repair issues in a home should be addressed before the home is put up for sale.  Odors/stains from pets and cooking should be cleaned up and eliminated.   Also consider removing items not used every day and box them up in storage or in a relative’s basement to help reduce clutter.

Exterior curb appeal also plays into the decision making process for buyers.  Mowed lawn, leaves cleaned, fresh mulch, nice flowers go a long way towards saying the homeowner took care of their house.  The curb appeal will draw buyers in from the very first picture online and at the very first visit so landscape maintenance must be kept up at all times.

4.  Access and Showings.

 If the buyer saw 6 homes that day and was not able to see yours, your unseen home never comes into their thinking when considering which house to make an offer on. The inconvenience of having to clean a home up for a showing is far outweighed by the inconvenience of having a home on the market longer and for more showings because a potential buyer who would have made an offer never got to see the home.  Additionally the longer a home stays on the market the more likely a price reduction will be needed in order to get it sold.

During showings all people and pets should leave the home.  While it is not always possible to take pets out of the house during showings, putting the pets in their rooms, kennels or other areas out of the way of homebuyers will help.  Best would be to remove all signs of pets possible so that way homebuyers don’t imagine smells that are not necessarily there.

5.  Communication.

Communication is critical in the home selling and buying process. Your real estate agent needs to timely communicate to you any requests to view the home or buyer questions that may come up. Home sellers should get back to their real estate agent as soon as possible. Questions from the buyer left hanging can cause them to move onto one of their other home options since they don’t have enough information to make a decision on the house they had a question about.

Some offers on homes can come with short time frames to respond.  If it takes your Realtor more than 24 hours to forward you an offer that expires in 8 hours that deal just expired before a chance was had to look at it.  By working with a professional real estate agent who returns phone calls and emails effectively there is less chance of an offer slipping through the cracks.  Slow communications by anyone involved in the home selling and buying process is a deal killer.

6.  Motivation.

While this is the last area listed it can also be the number one source of your home not selling since if motivation is lacking rest of the points above don’t really matter. What is the motivation to sell the home?  Are those motivations still valid? By reviewing the reasons for wanting to sell a house and then re-affirming that commitment can put a home sale back on track and allow focus to be put on any other areas that need addressing.  With proper motivation and understanding the goals for wanting to sell a home, home sellers will set themselves up for success.

Often times when a seller says “We don’t HAVE to sell the home” they have just taken the first step to killing their chances of selling with their lack of motivation. Once you phone your real estate agent and list your home for sale, commit to the sale and see it through to the end.

Bottom Line

While the stress and tension of selling a home can be high, having a home expire off the market without any offers can make one question why they are involved in the process in the first place.  Pricing and marketing are some of the critical areas where if done wrong or not done at all are sure to be the cause of failure for a home sale.  The other areas noted as well are important to pay attention to as small slips in one area can jeopardize the whole sale causing one to have to start over again.