I was speaking to a relative the other day…[who shall remain nameless]…she said that she and her hubby really want to start flipping houses with minor repairs like paint and carpet and make a “quick flip” she said. I tried my best to hide the fact that I was choking on my own saliva so as not to squash her dreams.
These days everybody wants to be a “flipper”… just like on TV. They watch shows like Property Brothers just to name one and they believe it’s easy and fun…Oh, and of course, you can get rich quick…..NOT TRUE… It’s a tough business and if you’re not careful you could end up losing your ass! [lots of money] If you make the wrong deal you could be looking at months of work that may or may not make you money.
The problem is that too many people believe they can just make tens of thousands by making a few minor repairs like paint and carpet on a fixer. This way of thinking has caused a lot of wanna-be flippers to lose small fortunes.
It sounds like a fantastic idea… Buy an ugly house super cheap, slap on a new coat of paint and new carpet, list it with an agent that looks like a supermodel. Then sell for a whopping profit that you could live off of for a year!
Sounds easy enough. The silent killer is not doing proper research before you buy.
A new client we started working with asked me how much to offer on a property that he liked… a lot. She told me that she didn’t want to offer more than a penny over 85% of the tax assessed value.
I first explained to her that the tax assessed value is not the same as the current value on a home. The tax assessed value of a home is basically a rough estimate based on the square footage and it may have been several years since the last assessment was performed. And it doesn’t reflect any upgrades or improvements that may have been done to the home. It’s basically just used to form a tax basis.
As a matter of fact, tax assessments are even worse than the ever-popular “Zestimate”…and that’s pretty bad… Even the CEO of Zillow fully admitted that throughout the US these estimates were off from anywhere from 8% to 30% depending on what part of the country you’re in.
So, what’s the best way to find out the true value of an Orlando investment home?
As an experienced Realtor/Investor myself, I can tell you that the first step is to determine the ARV [After Repaired Value] on a home. This will be the amount you can easily sell it for once it’s been remodeled. How do I, do this you ask?
Much like a secret spy, I have access to secret website portals that are coded and encrypted and considered classified and not accessible to the general public. Even more important, I can easily determine the strengths and weaknesses of a house that a civilian would surely overlook. Armed with this intricate knowledge together with the fact that I literally walk through hundreds of homes each year, means that I provide you with an expert assessment of my own home’s value.
Once I’ve come up with the home’s ARV, it’s then time to figure out how much you’ll spend on making the repairs to get it to the ARV and factor it all in. I always assume that the house will sell for the lowest amount out of the comparables in the area just as a safety measure.
Once I have all these numbers in place, I’ll be able to see if the deal makes sense or not to proceed. Whether I’m looking to buy an investment home or finding one for one of our many investor clients, my process is always the same.
Unless you’re a realtor yourself you’ll need to contact an Orlando Realtor.
Most newbie investors end up getting into trouble by trying to turn a non-deal into a deal because they’re so eager to get started flipping… a recipe for disaster. You should start with the ARV then work backward as I explained earlier.
So, just like a spy on a secret mission, the more intelligence you gather on your target, the better chance you will have at success when you’re ready to pull the trigger…
