A great way to make money in real estate is making money with a fix and flip property. However, it isn't about repairing drywall and planting flowers. What this is about is how you do the numbers.
Buying and selling a fixer-upper even without a definite plan is what most people often do. They buy a house, fix it up, then add $10,000 or $20,000 onto their costs. Then, they will put the house up for sale at this price.
Have you ever bought a house according to what the seller has into it? Of course not. You look at similar houses to determine the value. If what you have is $110,000 into a fix and flip project and similar homes are selling for $105,000, then how much will you get? You may have noticed that it has nothing to do with what you have spent.
The Fix And Flip Formula
The after-repair value of the house that you are looking at is what you need to determine. Get an appraiser's help, or look at what similar houses have actually sold for (not asking prices). The price that it is likely to sell for will be your starting point.
Calculate costs: closing fees, loan fees, document prep, homeowner's insurance, title policy, repair costs, interest on loans, property taxes, sales commission, fees, title policy, etc. What you want are the projected costs of all four categories namely buying, improving, carrying, and selling. From the expected sales price, you can subtract all costs.
Subtract a profit that makes it worth the effort. Now you have the highest price you can pay. You have to walk away if you can't get it for this price or less. You'll offer thousands less, of course, to give yourself negotiating room.
Example of a Fix and Flip
You were able to determine that you can get $98,000 for the fixer-upper that you have found once it is done. For the buying costs, it will be about $2,000. Repair estimates add up to $8,000. Carrying costs will be $2,500. The sales commission and other closing costs will amount to about $8,000. You figure in $1,500 for the "unexpected." For your effort, a profit of about $10,000 is what you want.
When all of that has been subtracted from your expected sales price, then you have $66,000. If you want a safe real estate investment, then that's the most you have to pay. If you and the seller can't settle on something under $66,000, then offer $61,000 then walk away.
What you do is that you always start with the eventual sales price and work your way back. In order to safely do a fix and flip, this is the right way.
If you are just beginning your search for Playa Del Carmen real estate you will undoubtedly have many questions about the process. Let us show you Mexico real estate for sale and guide you through the process.
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