How to Determine Value of a Fix and Flip Property
As a real estate investor, you have to decide what to do with an asset after you purchase it. If you think it has long-term potential, you rent it out as an apartment. Sometimes, though, you don’t want to hold onto an asset for a long time. Instead, you renovate it and sell it for a better price in a process known as fix and flip. When you look at a new property for the first time and think you want to use the second option, take one of these steps to determine whether the property is worth your investment.
Estimate the Value Yourself
If you have extra time and are confident in your abilities to determine a property’s value, you can inspect your potential purchase yourself. Set up a time to look at the entire property with the owner and identify all liabilities. Bring a checklist so you don’t forget to check hidden areas for damage, and don’t be afraid to ask the owner questions about problems you see. The benefit of this method is that you avoid fees, but you do have to take time out of your schedule to complete the inspection.
Hire an Expert
If you’re short on time but you have extra capital, hire an expert to inspect the property for you. He or she has the knowledge to decide on a property’s value much more quickly than you do, and you don’t have to worry about being present for the inspection. This option is especially helpful if you’re considering multiple properties at the same time or if you’re far away from the location. Still, you should only hire a professional if you feel fairly confident that the property is worth your investment. Otherwise, you risk wasting money on an inspection that doesn’t lead to a new fix and flip property.
Use the Rules of Thumb
If neither of these options appeals to you, consider using the rules of thumb approach. This is an inspection that you perform yourself, but it takes less time because you do not personally inspect every inch of the property. Instead, you choose a few aspects of the property to evaluate and then base your decision on these results. The process is slightly risky because you may miss some issues, but you also save time and money.
Decide between these three methods of determining the value of a fix and flip property based on your schedule and budget.