Why flip houses? Isn’t there a quicker and easier way of making money?
Well, I guess there is, but for us at the moment, building and renovating for ourselves is more of a long term, side venture, as we also run a busy Building Company creating gorgeous homes for our clients.
Obviously, all this buying, renovating, building, and selling has got to be profitable to make it worth it right?!
So, we have learned to apply some rules surrounding any potential investment opportunities which help guide us into the right purchase. Basically, the numbers have to add up.
RULE # 1 – Avoid Emotion
As soon as emotion gets involved, rules go out the window!
Our most recent purchase was one I was reluctant about because I really didn’t like the house! My first impression was that it was cold, dark and the orientation was all wrong.
Lucas and I went to the Open House and pretty much spent 10 minutes walking around the property before we left. There was really nothing about it that drew us in, and our initial thoughts was that it would need too much work. However, what did draw us in eventually, was that the numbers added up.
We didn’t get emotionally involved and were willing to walk away if our offer wasn’t accepted. Eventually it was and, well, here we are!
RULE #2 – For every $1 we invest into a build, we want $2 back.
So, if we purchase a property for $500,000 and then invest $100,000 into the build project, we will want to sell the property for a minimum of $700,000 (after costs).
This means, we have to know our market – who are we selling to?
In the beginning, we stuck to entry level homes, so the interiors and product selection was minimal and basic.
Currently, our target market is families in a higher end price bracket – which is easy! We know what families want, so basically, we just build what we love and go from there!
RULE # 3 – Stick to the Budget!
Right from the get-go, we will work out what we want to spend on the build, and I run the job throughout Job Management Software which we use for our Building Company (you could also use your basic Excel Spreadsheet).
This helps me keep a track of every incoming and every outgoing expense, so I know at any time, exactly where we are at financially.
It is SO easy to get carried away and we have learned (the hard way), that if the budget goes out the window, so does your profit!
So, there’s our Tips for getting the most out of your next Investment opportunity.
