- Follow trends in commercial development to identify up-and-coming neighborhoods.
- Spend money on renovations where it counts the most.
- Have the home inspected after the remodel to catch anything that may have been missed, before it hits the market.
HiWhether your clients want to know how to spot the next up-and-coming neighborhood or can’t decide which part of the house to invest the majority of their budget in, there are a ton of factors to consider when it comes to the business of fix-and-flip investments.
1. Think location, location, location
As most real estate agents know, the age-old rule rings true today more than ever.
The first indicator your investor clients should look for is to pay attention to areas that have proximity to good schools, restaurants and shopping centers that have low inventory. The resell data can provide a lot of valuable information.
A “hot” neighborhood for a flipper, for example, has really low inventory — specifically, low remodeled inventory — so a buyer has to either get a project or look elsewhere.
Another indicator is seeing other flips. Investors are always looking at neighborhoods that are about to turn, so if you’re driving around with your client and start seeing dumpsters in driveways, that’s a good sign.
2. Follow commercial developers
Looking for good schools is a more obvious indicator, but a savvy real estate agent encourages investors to follow commercial trends.
When commercial developers move into a neighborhood to renovate old shopping centers, that typically means they are seeing growth in that neighborhood, and residential real estate will follow that trend.
Along the same vein, look for new local restaurants in the area. Restaurants typically seek out cheap real estate, so they’ll take a risk in an area and draw the crowd to it.
3. Pay attention to design trends
We’re all seeing buyers becoming more savvy in terms of design and architecture trends — thank you, HGTV — so it’s important to spend money on renovations where it counts most.
The kitchen and bathrooms are the big-ticket items, but potential buyers might get overwhelmed by the thought of doing it themselves.
In terms of architecture trends, investors need to ensure their flip blends well with the neighborhood.
For example, you could spend a lot of money getting the best of the best for your home, but if it’s Mediterranean-style in a neighborhood with a cottage look, it’s going to take twice as long to sell, even if you spent twice as much as the Pottery Barn bungalow next door.
Notably, a more modern design aesthetic is more popular today than that Tuscan look everyone craved a decade ago.
4. Consider the quality
A good flip takes quality into consideration. You can “put lipstick on a pig” as the saying goes, but if a buyer gets into a home and is unhappy with the renovations, it will have a trickle-down effect on the entire neighborhood’s property value, and the next investor’s high comp will take longer to sell.
Real estate agents can encourage their investors to spend money on those big-ticket items that ensure a sound house and to have the house inspected after the remodel to catch anything that might have been missed, before it hits the market.
If you have clients who are interested in fixing and flipping a home, make sure they focus on location, specifically up-and-coming neighborhoods, incorporating popular design trends and emphasizing quality at every turn.
These are cornerstones of a successful real estate investment.