From seasoned professionals to first-time property investors, flipping properties remains one of the most popular ways to generate revenue, however, market changes can influence how you can maximize the benefits of your investments. Depending on market conditions, sometimes, a fix and hold strategy can be more lucrative than selling a property for quick gains.
The Classic Fix and Flip Strategy
Flipping properties is relatively simple. When you line up a potential flip, you look at comparable properties in the area and what their value is. The idea is to buy low, renovate the property to give it value without going over your budget. A note to beginners: Low-end renovations will not increase the value of a property. Try to strike a middle ground between affordable and high-end looking renovations to increase value and attract buyers. Once completed, you can list the property, sell it, pay off any financial obligations, and bank the rest. The key is to track local property market trends to ensure you are getting the most value for your investment. If it’s a seller’s market, you will be able to sell rehabbed property on the higher end of the price range based on comps. You want to avoid keeping the property for sale for long since the interest you will be paying will cut your profits.
Fix and Hold
When property markets are less robust, flipping a property may not yield target revenues. Downward pressure on a micro- and macro-economic scale can impact property flippers. Fortunately, a sound fix and hold strategy can help you weather a downturn in local property markets. Fix and hold is a method by which commercial real estate investors keep the property in their portfolio until markets improve to favor selling. Fix and hold properties are converted into long-term and short-term rentals, depending on market trends, so commercial real estate investors can start generating income until a suitable buyer comes along or market conditions become more favorable for selling. The idea is to build equity on the property by using rental income until you decide to sell the property.
Whether you need financing for a fix and flip project, or you want to get a property renovated for tenants, contact The Capital Rams. We offer a wide range of commercial real estate solutions for your needs.