There is a lot that goes into flipping a property. Not only do you have to acquire it at a price that works for you but also, you need to put the right amount of work into it. There are many investors who are disappointed in their results because they fail to see the end of the process before they start. Selling your investment is great but the goal is to maximize your return. This starts from the minute you take ownership of your property. There are a handful of things you can do from the time of acquisition to the sale that will help in this area. Here are five tips to help sell your investment property for a maximum return.
- Think Like A Buyer. One of the biggest adjustments new investors need to make is to change the way they think. You need to be able to put your personal feelings and ideas aside when rehabbing. As much as you may like a certain property characteristic, you are not going to be living in the house. As you sit down and map out what work you are going to do, you need to keep your buyers in mind. This starts with understanding the area and local market. Put some time into researching what kinds of properties have sold in the last few months. Look at the listing sheets to see what features these properties have. It is also a good idea to take a look at homes that have sat on the market for a considerable amount of time as well. After you do your due diligence you should be able to have a good idea which areas you need to improve and which you can scale back. From the minute you start any work you need to think like a prospective buyer would think.
- Luxury Vs. Affordability. When rehabbing there is a delicate balance between luxury and affordability. All buyers want to live in the nicest house possible. They want granite countertops, updated bathrooms and stainless steel appliances. However, many are not willing to pay a premium for them. Throwing money at a property does not guarantee that you will see a return. Over improving your property for the market may turn out to be a waste of money. With any sale you want to create the highest amount of demand. This often means making the property as affordable as possible. A strong level of affordability brings in the maximum amount of buyers. Not only do you increase the chances of a quick sale but you can also create maximum demand. This demand often ends up in a bidding war which pushes your final price higher. Nice things work only in markets where buyers are willing to pay for them. Never throw money at a property without understanding the potential return.
- Work With The Right Buyers. Doing the right work does not guarantee maximum return. You need to sell to the right buyer. Regardless if you have one offer or multiple ones you can’t rush to judgement. Accepting an offer that doesn’t close sets you back months. There are times when the highest offer may not be the best one. You need to look at everything involved. The contract, prequalification letter and any financials must be reviewed. It is no secret that the mortgage market is still filled with delays and 11th hour issues. You want to work with a buyer that is as clean as possible and can close without any problems. By accepting a higher offer with a prequalification that looks shaky you can end up wasting 45 days before you find out there is an issue. At this point most of the buyers that were interested most likely moved on to other properties. You will be forced to start the process over again and wait at least another month, possibly longer. Price is always important but working with the right buyer can help you get the best deal.
- Don’t Wait To Market. There is some debate in investing circles as to when is the best time to market your rehab. While it may make sense to wait until all the work is done to show it to the public you can always market to your network. There is no need to wait to generate interest with local attorneys, mortgage brokers, contractors and anyone else associated with the business. You can take advantage of social media and make posts regarding your property. The sooner you get the word out the more likely you can find a buyer.
- Price Right. While this is listed last it may be the most important step in selling for a maximum return. Most buyer interest is based on the list price. If you list too high you will lose a large segment of buyers that may have had interest. By listing too low you can end up leaving money on the table. Trying to squeeze 5% more out of the property has a negative impact. A home that sits on the market quickly loses appeal. Real estate agents will direct their buyers to more affordably priced homes in the area. After a few weeks of inactivity you will be forced with a decision to reduce the price. Once this happens buyers look at your property as damaged goods and any offers that come in will be discounted. You are always far better off listing at the right price and hoping to generate demand than trying to get a price that you know isn’t very realistic.
Generating maximum return begins at the start of the process and goes all the way until closing. Just a few percent more on five rehabs a year can equal a large increase in your bottom line.