Tips for house-flipping during COVID-19
Here are six tips to help you find the best flips during the pandemic
The pandemic certainly isn’t slowing down the Denver housing market. According to the Denver Metro Association of Realtors (DMAR), this past July set a record for the total number of closings that month and, at the same time, the average single-family home sale price soared above $600,000 for the first time.
With numbers like those, it’s no surprise that housing demand in Denver is breaking records. To that end, house-flipping in the area continues to be a great investment. If you’re thinking of getting into the flipping business, read on below. Here are six tips to help you find the best flips during the pandemic.
Take advantage of low interest rates
Before you can buy a home to flip, it’s crucial to get your financing in place. Luckily, right now the interest rate environment is favorable to investors. In fact, interest rates are at near-historic lows. The interest rates for 30-year, fixed-rate loans have hovered between 3.0% and 3.25% for the last few weeks, according to statistics from the Mortgage Bankers Association.
If you don’t have enough cash to buy a property to flip outright, you should take advantage of current interest rates and secure financing that is both reliable and affordable. The record-low interest rates won’t last forever, so take advantage of them now before it’s too late.
Focus on finding a deal
Remember, real estate investing is all about the math. Especially when you’re flipping a home, it’s helpful to find a property that’s listed below market value, which can be difficult in the current seller’s market, where buyer demand is higher than home inventory.
In light of that, you may want to consider focusing your search on off-market properties, which tend to hit the market at a lower price point. As the name suggests, off-market properties aren’t listed on the MLS, but you can find them by browsing property records, launching a direct marketing campaign, or networking with wholesalers.
If you don’t focus on off-market properties, you probably won’t be the only one interested in your favorite listings. Odds are, you’ll be up against other offers. With that in mind, you may want to think about waiving your contingencies or offering to pay the seller’s transfer tax in order to make your offer stand out from the crowd.
In seller’s markets, homes tend to sell quickly, and you’re more likely to get into a bidding war. If you don’t act quickly when you see a home you’d like to flip, you will likely lose out.
In markets like the current one in Denver, even fixer-uppers go more quickly than usual. That said, when you eventually do find a deal that piques your interest, it’s important to make sure you’re ready to make a move.
For best results, a service such as Zillow or Redfin will allow you to set alerts on your property search so that you’re notified as soon as a relevant property comes on the market. When it does, do your best to clear your schedule; the sooner you can get out to see the potential property, the more likely you’ll be able to submit an offer.
Find the right contractors
Once you’re under contract, your next step is to find the right contractors. Unless you’re a very experienced flipper, you’re going to need some help. Focus on finding contractors who not only give you a fair price but who also have the time to get the work done.
With the unemployment rate in Colorado at 7.4% as of July, more contractors might be looking for work than before the pandemic. Still, you’ll want to get multiple bids for the project as well as references.
Here, your goal should be to go with the contractor who offers the best mix of quality and value. Find ones who will get the work done both within a reasonable budget and on time.
Set a budget
After you’ve gone over all of your estimates and found the right home to flip, the next step is to create a budget for the project. Without a budget, it’s too easy to put too much money into the property and end up selling for less than you’ve invested. If you want to make a profit off your flip, it’s important to keep your spending in check.
However, keep in mind that every renovation project comes with unexpected costs. To that end, be sure to leave a little wiggle room in your budget for the unexpected. Generally, experienced flippers tend to leave at least 10% of the project cost for incidentals.
Choose the home improvement projects that have the most impact
Finally, not all home improvement projects are created equal. Although Denver has one of the nation’s hottest real estate markets, your flip will sell for more if you cater to the needs of your potential buyers.
To do that, conduct sufficient market research so that you understand what type of buyer is interested in moving into the neighborhood where your property is located.
Additionally, on a more general level, you’ll want to focus on doing projects that have a good return on investment (ROI) — such as a bathroom or kitchen remodel — as opposed to those that may be geared toward your personal tastes.
The Bottom Line
While flipping homes is not an easy business, investors who are willing to put in the hard work can earn great returns, especially in a hot market like Denver.
If you’re in the market for a property to flip during COVID-19, use the tips above to ensure that you set yourself up for success and sell your home successfully.