How to Calculate the Value of a Fix-and-Flip Property
Whether you are just getting started with fix-and-flip properties or have been in the field for a while, you will need to be able to calculate the value before deciding on a piece of real estate and looking for financing. This means comparing the current market value to the cost of needed improvements and a likely sale price after the repairs. There are three main ways to calculate this value which include hiring a pro and doing it yourself. Choosing a method is entirely up to what gives you the best value in accuracy and speed.
Do It Yourself
To make these calculations yourself you will need to do a lot of research and math, but it can be done. The more experience you have in calculating property values, the easier it will be and the quicker you can do this process. By doing it yourself you will not have to pay for anyone to do it for you, which can be a big advantage when you are starting out. However, one of the biggest downsides of this method is that you have to put in the time and effort yourself which may take you away from other tasks.
Hire a Pro
You can hire a professional to calculate the value of your fix-and-flip property options. The benefits of this method are that a pro can usually do the calculations and research more quickly and accurately than you can do it yourself, and you can spend that time working on other properties or tasks. The main downside of hiring a pro is that you will have to pay for the service.
Use Rules of Thumb
By using the rules of thumb method, you are making an estimate based on similar properties in the area and which have been flipped in the past. This substitutes high-level data for the rigorous research approach and can save you considerable time when trying to make the calculations yourself. It is important to remember, however, that you may be missing some key issues with the specific property you are looking at when using this approximation.
Whichever method you use to calculate the value of your fix-and-flip properties, it is important to remember that you get out of it what you put in. This means that the more research you do, or the better the reputation of the professional you hire, the better the calculations will be. This can help you decide which properties are the right investments and which ones you should take a pass on.