Heard of a fix and flip deal this week? Yeah. Sound interesting? Sure. But how and where do the fixers and flippers figure out how to do it and make it work? This is where experience and caginess will overcome youth and enthusiasm.
First, you have to buy the property. If the property is auctioned in Phoenix, you must have a $10,000 check or money order on hand just to bid on a property. No games here. And, you better have all the remainder of the cash ready to go to the auction company the next business day if and after you win the property bid. You can buy any property you want. Just be the high bidder.
Second, you must have a good estimate of the cost to fix up, and the actual sales price (close of escrow) of comparables in the neighborhood. I does not just matter much what you pay for the property as long as you make a healthy profit. You want the â€˜delta' or â€˜spread' between the estimated sales price and the property purchase price to fit your budget. Can you live with that spread?
Third, refine your detailed estimates of repairs and changes you want to make to the property.Â Maybe you can't get into the property until after the auction. You must have some faith that there are no big alligators inside that can bite you.
For example, we bought a property at auction a few years ago. We did not get a chance to see the inside of the house until after we purchased the property. And wow, it needed a complete redo. Luckily, prices were going UP, so we were able to make a healthy profit.
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Fourth, get the money. Your bank account, family or friends, investors, or...borrow â€˜hard money'. This is where 18% interest +++ comes in. It could be a 6 month loan, balloon payment due. Can you handle it? Hmmm... you say? Little unsure, you think? Yes, you're right! You better think about this, and make sure you can handle any alligators that can â€˜bite' you.
So, what are you waiting for? Go to an auction, take notes, or hire a specialist to guide you. Don't try this at home. You better consult with experts and business partners.
And, there are deals, deals, deals out there today and tomorrow. Prices are rock bottom in the Phoenix Metro area. Interest rates are low today, but not forever.