Morris Essex and Union County Real Estate Investors
How to increase the odds that you will make money in any New Jersey real estate market as a investor.
1. Find a Realtor who is knowledgeable about the area you are looking in. This knowledge will come in handy in many many ways.
2. Understand what the local permit laws are. Is it going to be difficult to do any of the work yourself and still be in compliance with local regulations.
3. Understand you budget, know what you can comfortably spend on purchasing the home, fixing it up, and carrying cost until the home sells.
4. Have a good, well thought out plan, for making the home all it can be (with in your budget constraints). Your Realtor comes in very, very Handy on this point as he/she will have a good understanding of what currently adds value in the homes specific market.
5. If at all possible, before you actually purchase the home, have your budget laid out as detailed as possible so that you understand if this is even likely worth your time. Some homes look like great deals until you do this step. Be sure to add at least 10% to your budget for things you don’t anticipate, something always comes up. Believe me something always comes up.
6. When purchasing the home, strong negotiation skills are a must. Make sure that you get the best deal that you can get. If this is the home you want, make sure you get it.
7. OK, you have the home now. Time to add value, get quotes on anything that you cannot do well, and all the things that need to be done and legally you cannot do. Usually home flippers do not hire general contractors, but act as their own general contractor. Once you have hired your contractors, remember they are working for you in a business relationship, keep it that way. Contractors who do a good job, get hired back on other jobs, referred to friends and acquaintances, and basically become a strong ally in achieving your goals.
8. OK, as the work on your flip is progressing, don’t be cheap on things. That 10+ year old carpet needs to go; the paint all needs to be refreshed, warm colors not just white and off white please. Remember, kitchens and bathrooms sell houses. Especially if it is a first time home buyer type home, I have found that it is best to have nearly new to brand new appliances in the home, to seal the deal. You should consider adding a new refrigerator, Stove, Dishwasher, built in Microwave, sometimes even Washer & Dryer. Unless the kitchen does not warrant it, try to do black or stainless steel appliances, in a well known brand. Typically you will need to replace the light fixtures as well. You don’t have to spend lots of money to make a big difference, but remember understated is usually best.
9. Curb appeal, clean up the front yard, plant some annual flowers, trim the bushes, if the landscaping looks bad, replace it, replace old ugly mail boxes, put a nice quality welcome mat on the front step, if the front door is in good shape, paint it, if not in good shape replace it. First impressions are everything.
10. Time to sell it. Sit down with your Realtor and carefully go over the comparison properties for the neighborhood. Look at days on market, what is the trend, is the market improving? Price the house at the market. Is the market stable? price the house 1% to 2% below the market for a quick sale. Is the market declining? price the home 3% to 5% below the market.
The goal is to turn your investment as quickly as possible at a reasonable profit level. You can then move on to the next project and continue to make money. For more good info on real estate as a investment read flip a good resource for good practices for success.
Remember, Over pricing your flip is the worst thing you can do. It leaves a bad impression on the would be buyers who know that once there has been a price reduction, usually there is more room to deal yet.