Purchasing a home to renovate is the first step in the flipping process. But how do you know which house is the best to buy?
Generally speaking, if someone was to buy a low priced home, controls the cost, and then sells high, they will cash out big.
If only it were that simple.
Unfortunately, it is not. There are many questions that you will need to ask in order to be successful when you are flipping a lake home.
To begin, how do you know what market would be best; low market, middle market, or high market?
What makes the home a worthy candidate? How do you find the homes to purchase? There are a few rules to follow and some tricks to learn, but don’t worry.
We are here to help.
Simple Formula
One formula that offers good outcomes is pretty simple: Look for distressed homes that would sell for a median price if in a certain demographic area.
Buy it for less than the median price, renovate it, and then sell it for more than what you gave for it, including the costs of the materials and renovations.
Demographic Area
What area should you deal with? In every area there are homes of different values.
Typically they are clustered in small communities with separate, but invisible borders. This is even more complicated at the lake, as it is not uncommon to have a multi-million dollar home not far from a $200,000 cabin.
If you are purchasing your first home to flip, you probably want to find one that will be lower in price and low in maintenance requirements.
Keep in mind that the return on the flip will not be as large when dealing with low end properties. However, you can save the money that you sold the first flip for to upgrade to a higher priced area.
Renovation Checklist
There are obvious aspects of a home that you should pay close attention to before you purchasing it.
A real estate agent will be able to walk you through the home before you make a solid decision.
This checklist should be gone over before you sign any paper work. The list also includes a price range of what some sample renovations would cost.
Roof: $0-$8,000. This will depend on the condition of the roof. It is typically easy to get a price per square foot from a contractor.
Gutters: $0-$1,500. On average, gutter repair/replacement can cost upwards of $1,000. However, this number is subject to change depending on the condition and material of the gutters.
Chimney: $0-$15,000. It is easy to replace the stucco coating or to repoint a few bricks; however, do not underestimate the pricing for renovations. Talk to a contractor about the chimney before you decide what to do with it.
Paint and Trimming: $2,500-$5,000. You can either find a moderately priced painter or you can paint it yourself. Of course, if you do it yourself you will spend less money but perhaps more time in the long run.
Additional Thoughts
Another aspect that is unique to lake homes is the waterfront. Pay close attention, as this is a major selling point for most people looking to buy, and improving the waterfront can be very costly. Adding or repairing a boat dock or a seawall can do wonders for the property, but are not cheap undertakings.
Other common items that can make a home value rise include kitchen upgrades such as new cabinets, replace carpet with hardwood and simple bathroom installations such as new faucets.