Buy a property at a low enough price, and you can almost always make a profit on the flip. But pay too much, and the flip will be doomed from the start.
So how do you buy right?
How much should you pay for a house you plan to flip?
Experts suggest you pay 70% of the after-improved value of the home minus repair costs.
Here's an example.
Home price$200,00070% rule$140,000Repairs needed-$30,000Maximum offer$110,000
Does it seem difficult to purchase a house at almost half price? This is why home flipping isn't as easy as it first appears. In hot markets, it's hard to get any discount at all on a home, let alone a 50% discount.
But if you find the right home and negotiate, it's possible.
Know the market
The best way to get a real deal on a property to flip is to know the market area. Before you even put an offer in on a property, you should have a very good idea of what the house will sell for (not its Zillow value or other estimate).
Location is the single biggest factor in determining the value of property. If the prevailing market value in a neighborhood is about $200,000, then you should fully expect to pay substantially less than this for the flip. In most cases, there’s little justification for a property in such a neighborhood to sell for substantially more.
You can get to know market values in your community by paying attention to sales activity in the area. Local newspapers typically provide news of recent sales, including final sale prices. But you can also get this information from online sources.
