The truth is, not every property is a good fix and flip investment. Some properties will make better rentals, or the profit just wont’ be in the deal. In the fix and flip business you need to be open to new possibilities, but also develop a keen sense for projects you should avoid. Here are three red flags to watch for.
Red Flag #1: There are issues with the property’s title report.
Buyers, their lenders, and insurance companies all review these reports to make sure the purchase will be clear of any liens or other restrictions. Normal title reports usually include things like mortgage balances and property tax records. You might also see any restrictions put in place by condominium or neighborhood groups.
The red flag is raised when things show up on the title report that are out of the ordinary. Liens on the report from the IRS, court judgments, or unpaid contractors will remain until those payments are cleared. Issues ranging from unknown heirs to boundary disputes could show up too, resulting in some significant roadblocks.
Red Flag #2: The local area shows no signs of rebounding.
Location means just about everything when it comes to fix and flip potential. Investigate the local neighborhood to determine things like school ratings, recent real estate sales, and unemployment rates. If your research doesn’t turn up any indicators of growth or future events that might bring buyers, your property could sit for too long..
Fix and flip projects require extensive research. You won’t be able to determine the potential value of a project from only online resources. Make sure your time, effort, and money don’t go into holding costs while the property sits unnoticed in an area that’s on a downward slide.
Red Flag #3: The property is far away.
A fix and flip project will take a significant amount of your time and energy. A project that requires you to drive long distances will increase your stress, expenditures on gas, and vehicle maintenance. You’ll need to acquire a number of permits and adhere to local building codes, so expect to spend time at local offices too.
Networking with local contacts is essential to profitable projects. If you need to travel long distances to meetings, you’ll lose out on important opportunities for learning the characteristics of local area population and government.
After looking for these three indicators of a risky fix and flip project, you’re ready to take action. Gorilla Capital offers funding for single family residential fix and flip projects across the country.
Their streamlined process includes 90% funding of the purchase, rehab, and management costs. The 50/50 split of profit means you can navigate the process knowing that your financial bases are covered. Use the Fix and Flip Calculator for your project, then fill out the program application to get started.