Want the Secret to the Perfect Investment Property ROI?
There isn’t any. Well, almost.
The Perfect Storm for Property Investors
Let’s talk about the perfect scenario for achieving a high return on your investment property (aka flip).
If your project meets this criteria, your gamble might pay off (and yes, this is a gamble):
- You purchase a distressed (short sale, foreclosure) property for significantly less than market value, or you inherit the property.
- The home is smaller than other homes in the area.
- The location of the property is not compromised by commercial property, noise,busy streets or other negative external influences.
- The home is solid and well built but needs mostly cosmetic work (paint, carpet, cleaning, junk removal).
- You have a trade discount that you can use to purchase the materials needed for the improvements.
- You can do most of the work yourself, or you have a crew of skilled, efficient workers.
- You are a good project manager and can plan to work flow to get the job done well, and quickly.
- You have all of your materials and permits before you begin work.
- You get the work done and get the property on the market before your cost to carry (mortgage, taxes, insurance) start eating your budget.
- You price the property a little below market value, in an area where homes are selling well.
Missing Some of These Investment Property Line Items?
If any of the above are missing, your risk of achieving less return on your investment increases. if you’re going to be a property investor, you need to be organized and efficient and you need to KNOW your market before you bite.
Strengthen Your Chance of a Good Investment Property ROI:
- Get an appraisal before you buy a distressed property.
- Know your numbers, limits, and room to maneuver.
- Do your research.
- Don’t assume anything.
- Make sure you have sufficient time and budget to complete the job.
- Hire a good Realtor who knows how to market in your area.
- Stage the house to show people a lifestyle that is appealing to the typical buyer for the area.
When in doubt, hold out. You can easily lose your shirt in a bad investment property, or you could make enough for a nice trip to the Bahamas. Don’t go on blind faith that your deal with be a good one – back up your expectations with hard facts and plans, and then make your decision whether or not to purchase property to achieve the Perfect Storm and a high ROI.