If you’ve thought about purchasing a fixer-upper to repair, remodel, and then sell for a profit, now may be a great time.
During the first three months in 2014, home flippers received a 30% gross return on their investment, which is one of the highest levels in years, according to data released earlier this month by RealtyTrac. In the last quarter of 2013, that ROI was just 4 percent. Home flippers bought the homes for an average of $183,276 and sold them for an average of $238,850, according to the data.
While flipping a home will cost money upfront to buy and spruce it up, BuildZoom reports that the median amount spent on improvements for home flips is only about $4,800.
The housing market has been more stable than we’ve seen in years, which contributes to the bigger returns.
If you are considering flipping a home, here are three things to consider:
- Cost. As stated above, the median cost for improvements on a flipped home is almost $5,000. However, that cost could increase depending on the work that the home needs. Create a budget for your project by estimating the cost of everything that needs to be done to the home and then add 10% to that. You can’t assume that you are going to make a certain profit, so only flip a home if you can remain financially comfortable if you just break even.
- Location. Look for a fixer-upper in a great location. Buying a property that is undervalued but is in a good location will help you get a bigger return on your investment. Know about the nearby schools, the school district, and the neighborhood.
- Timing. The RealtyTrac data showed that on average, it took home flippers 101 days to complete a project. During that time, you will need to devote a lot of time to home renovations. If you are very busy or have a demanding job, home flipping may not be for you.