3 Pitfalls to Avoid When Fixing and Flipping

The potential for significant returns has long made flipping houses a popular avenue for investing in real estate. And the current market conditions and low interest rates of late have made it all the more attractive to investors. In 2016, average gross flipping profits reached heights not seen since 2005, reported RealtyTrac.

With stats like that, it is easy to get caught up in the market fervor and only see the rewards, ​but fix and flips have some inherent risks. If properties are not properly vetted early in the process, it can lead to disappointment and unrealized profits. To make sure your next flip is not a flop, avoid these pitfalls in investing.

Blindly investing in a market. Researching a neighborhood is essential when selecting a property to rehab. As the old adage goes, location is everything and certain characteristics around where a property is located can pay big dividends.

​For one,​ a ​neighborhood with​in​ a strong school district is often a good indicator of high resale potential​. In fact, homes in the best school districts have 77 percent more value than homes located in low performing school districts, according to a recent study by Realtor.com. Additionally, homes in top school districts sold on average eight days faster than homes in below average districts.

Homes located in areas with low crime also tend to have a higher property value. ​One survey​ found that​ people in the market for a home prioritized safety even over price when considering a neighborhood.

There is also evidence that homes close to public transportation command higher prices. A joint study by the Public Transportation Association and the National Association of Realtors found that homes within half of a mile of a high-frequency public transportation were worth 41 percent more.

​There are a lot of factors to consider when evaluating the location of a potential investment, and a good real estate agent can help you identify ​opportunities that ​are most ​likely to payoff.

Failing to calculate post-renovation value. When house hunting for a property to fix and flip, you will be evaluating those in disrepair that are being sold as-is, which is to say at a value that is representative of its current condition. But before you even think about putting in an offer, you must first determine the expected value of the home once it has been fully renovated.

Known as the after repair value (ARV), it is the most critical number to your fix and flip venture. The viability of ​the project is dependent on your ability to manage costs. The ARV will help you determine the maximum amount you should pay for the house and renovations, so that you don't invest more into the property than it is worth.

The Internet offers a lot of real estate tools that can be useful for ​cursory research a​round​ potential ARV, but most sites are working from estimates.​ ​So, once you are serious about a piece of property​,​ you should consult a real estate​ ​agent well-versed in the​ ​area to develop a comparative home analysis.​ ​A licensed agent will have access to a multiple listing service (MLS), which can provide data on how much similar properties in the area have sold for in recent time​ and how long they were on the market. ​When evaluating properties, it is important to stick within a mile of where you are looking so that you get an accurate view of the market.

Forgoing an inspection. Rehab projects can offer significant gains, but they can also present unforeseen costs if you do not take the right precautions. It might not be possible to avoid all surprises during the process, but you can minimize them by having a home inspection before finalizing the purchase.

A house inspection should be included in the offer process to protect yourself from any unknown issues. Specifically, there should be a contingency clause within the house purchase agreement that states the buyer has 5-7 days to have the home inspected by a professional and that the purchase is dependent on the outcome of the inspection.

A skilled inspector will look for wood rot, pest infestations, roofing problems and cracks in the foundation. Major structural issues like these might be more than you bargained for and can make your project a money losing venture if not identified beforehand. But even minor issues that were previously missed can be an important bargaining chip in negotiating a lower purchasing price.

Flipping houses can be financially lucrative. And by avoiding these potential downfalls, you will protect your investment and set yourself up for success.

Get the capital you need for your next fix and flip project with AssetAvenue’s rehab loan program. Learn more here: https://assetavenue.com/rehab-properties.

10 Unpredictable Weather Locations with Great Investment Opportunity

Growing up surrounded by thunderstorms (good ol’ Florida!), I always found it hard to adjust to the ridiculously sunny California. So what if there was an occasional hurricane or threat of a tornado? There’s nothing like curling up on the couch when the wind picks up and the rain begins to pour down. We’ve compiled a list of some of the wackiest weather locations in the United States. You’ll be surprised how much profit can be made in areas where the weather gets a bit crazy to say the least, but it’s not enough to scare off the locals!

10) Kansas City, KS: Tornadoes

Tornado’s aren’t one to be reckoned with, however, you’d be surprised how many people love a good storm, and sometimes, a good scare. Southwest of Kansas City, is Dodge City, which is a top destination for storm chasers, and as of May 2016, it made headlines for missing a deadly tornado disaster by just three miles. Kansas City also happens to boast the best barbecue the country has to offer.

Population: 467,007

Average Profits from Fix and Flips in Kansas City: $100,000.00

9) Tampa, FL: Hurricanes

Or anywhere in Florida, honestly. Hurricanes are a common occurrence here in Florida, and if you’re from here you’d know, some of us love them. Think of them as extended thunderstorms and a great atmosphere to tell spooky stories around. For those who are lucky enough to not live on beach front property, the most we get is flooding, fallen trees, roof/home damage, and power outages. The kids like to celebrate the Hurricane Day perks as well in school. (school will get cancelled due to strong enough storms).

Storms don’t scare everyone off though. Florida is one of the top US destinations to live! With its sunny beaches and cute suburban towns, hurricanes hardly scare them away from living there.

Population: 352,957

Average Profits from Fix and Flips in Tampa: $142,611.00

8) Indianapolis, IN: Tornadoes

Another tornado destination. With tornadoes being a gamble, many continue on day to day without giving it a second thought. With state parks, stadiums, and plenty of museums, there are many reasons why Indianapolis is attracting many families to move here, including their affordable housing.

Population: 855,866.

Average Profits from Fix and Flips in Indianapolis: $153,119.00

7) New Orleans, LA: Hurricanes

New Orleans is arguably one of the most colorful cities in the country. From the French Quarter, to amazing eats, and unbeatable jazz music, you can see why people would choose to live here. While it is an extremely popular tourist attraction, New Orleans is always at risk for hurricanes during hurricane season. As we all know, Katrina slammed New Orleans back in August of 2005, destroying over 800,000 homes and displacing thousands. Despite this, many itch to live in the city and enjoy all it has to offer.

Population: 378,715

Average Profits from Fix and Flips in New Orleans: $160,000.00

6) North East, NE: Tornadoes

Nebraska falls right in the pathway of tornado alley. The locations in tornado alley rack up the most frequent visits from tornados in the country. Time to grab a blanket, a flashlight, and buckle down in the basement!

Population: 30,000

Average Profits from Fix and Flips in Northeast Nebraska: $130,000.00

5) Bay City, TX: Hurricanes

Or any cities lining the gulf coast of Texas. Just like New Orleans and Florida, cities along the gulf coast are bound to see hurricanes during an active season. Even with hurricanes lurking close by, it is not enough to stop folks from moving in and settling down in the gulf cities of Texas. The profits aren’t half bad either!

Population: 17,509

Average Profits from Fix and Flips in Bay City: $400,000.00

4) Anchorage, AK: Earthquakes

Anchorage seems to be growing popular with the younger groups of adults looking for a new place to adventure. Due to their endless list of parks, forests, and hikes, Anchorage is a beautiful spot to settle down in, or even rent out of for a bit. With the rumored sightings of UFOs, Anchorage also hosts an active amount of earthquakes throughout the year.

Population: 300,950

Average Profits from Fix and Flips in Anchorage: $368,172.00

3) Los Angeles, CA: Earthquakes

One of the trendiest and most crowded locations in the United States, sits atop a very active (and recently quiet) fault line. For some locals, earthquakes aren’t a thing. With a population roughly over 3 million, you can safely say the scare of the earth shaking beneath your feet does not steer many away. In fact, some like the rush of not knowing when the next quake is going to come along. You may even hear a few LA natives claim there is “earthquake weather”. Some locals just know!

Population: 3.84 Million

Average Profits from Fix and Flips in Los Angeles: $2.9 Million

2) San Francisco, CA: Earthquakes

San Francisco gives Los Angeles a run for their money as far as trendy goes. With it being one of the most expensive places to live in the United States, it certainly boasts a colorful and fun atmosphere. From its bar scene, to its lush hikes, there’s a thousand reason why one would wish to move here. San Francisco also sits atop a very active fault line, ready to blow at any moment in time. Just like Los Angeles, many locals tend to ignore this part of life and continue on. The investment opportunities here are endless.

Population: 837,442

Average Profits from Fix and Flips in San Francisco: $345,000.00

1) Kilauea, HI: Earthquakes

Hawaii is one of top tourist destinations in the United States. How could one argue with their lush hikes, amazing beaches, and unforgettable sites? Kilauea has a very active earthquake history. It’s not uncommon to get a few a day, even if it is under the 3.0 mark. Kilauea falls into the same boat as San Francisco and Los Angeles, where an earthquake could happen at any point in time, and have devastating effects. Some thrill seekers thrive off the idea, others don’t mind it, and the rest of us stay in our locations where the ground doesn’t shake as much.

Population: 2,803

Average Profits from Fix and Flips in Kilauea: $167,500.000

If you are a real estate investor looking to live on the weather edge and like the average profits, invest in the locations we have listed. Note, make sure to have the proper insurance to reduce your risks.

Tips to Transition From Landlord to Fix and Flipper

In the real estate investment business, there are numerous ways to make money. Being a landlord, you learn a lot about repairs, fix-ups, and of course, contractual obligations. Whether you manage one property, or multiple properties, you are aware of what it takes to keep a property in top shape. Being a renter can be a great way to make extra income throughout the year. If you are looking to maximize your profits, you could try your hand at rehabbing properties, whether you want to rent the property out and make profit over time, or sell them to make a large profit once.

How do you make the switch though? You know a few things about repairs, when there’s a busted light, a broken faucet, or a squeaky door. But what about replacing countertops? Flooring? Or even knocking down walls? Luckily, there are general contractors out there who know the in’s and out’s of flipping homes who are willing to do the work for you. (for a price of course).

You can decide to fix and flip in the middle of your rental career for personal reasons, or use it as an endnote to retire on.

A good example of a switch scenario is a past landlord I had. He managed the property for 20+ years, before deciding to completely redo it, sell it off, and then retire with the profits made. (Keep in mind this was in San Francisco, where you can Ellis Act your tenants and make a large profit off your property). It ended up working out nicely for him. Once everyone left, he flipped the building into condos and made a large sum of money.

Fixing and Flipping takes a lot of work, but since you have been renting properties and acting as the landlord, you have a good deal of experience under your belt. Just because you don’t know how to tear apart floors, rebuild a home, or have an in-depth knowledge of codes required doesn’t mean you can’t make the transition from landlord to flipper. You can hire contractors who know how to do most, or all of the work for you. General contractors can come in and help you assess what your rehab budget should be.

You may want to consider a “cosmetic” rehab for your first project. Here you leave the house structure and layout intact, but update all the features within the home. It’s a great way to get a start and learn a bit more at a slower pace than running in there with hammer. It costs less as well than redoing an entire structure.

If you don’t wish to invest in a brand new property, you could always work with the properties you already rent out. If your renters are leaving soon, you could always take time to rehab the property and sell it off to make a larger profit, without having to continue managing it for years to come.

Either way, with the right resources, tools, and knowledge, you can go from landlord to flipper in no time. If you want to get started, AssetAvenue offers loans for rehab or rental. You can find our fix and flip loans here: https://assetavenue.com/rehab-properties

Top 10 Millennial Rental Locations

Right now the rental market is on top of the game. The next working class generation seems to be struck by wanderlust, making it hard for more and more young adults to settle down in one area. This leads to higher rental demand. But where exactly are the vast majority of millennials flocking to? We’ve got the top 10 spots most frequently sought after for rental properties.

10) Anchorage, Alaska

From their fishing, to their nature trails, it’s no surprise people are beginning to head out to Anchorage. With an abundance of state parks, hiking opportunities, and even some whispers of UFO sightings, there is plenty to keep busy with.

Best Zip for Affordable Rent: 99504
Median Earnings: $38,659
Affordable Rent: $1,063

9) Washtenaw County, Michigan

Just outside of Michigan, sits Ann Arbor, Michigan. University of Michigan is housed here, which draws a large college population. The town is scattered with bars and nightlife, botanical gardens, and even a few museums. It seems once they finish up with school, most folks decide to stick around for awhile.

Best Zip for Affordable Rent: 48198
Median Earnings: $34,051
Affordable Rent: $963

8) Boulder, Colorado

Boulder has been soaring in popularity the last few years. Boulder houses some of the most magnificent and beautiful hiking trails, as well as state parks, museums, concert venues, strip malls, white water rafting, and the list goes on.

Best Zip for Affordable Rent: 80481
Median Earnings: $36,319
Affordable Rent: $999

7) Larimer County, Colorado

Just a smidgen above boulder, Larimer county is also drawing attention from the next working class generation. Imagine it as the more secluded, quieter side of Boulder, but still heavy in hiking trails, creeks, rivers, museums, and the beautiful Arapaho National Forest.

Best Zip for Affordable Rent: 80515
Median Earnings: $32,316
Affordable Rent: $889

6. Cuyahoga County, Ohio

Otherwise known as Cleveland, Cuyahoga houses the Rock and Roll hall of fame, Cleveland Metropark Zoo, casinos, museums, and right on the shores of Lake Erie.

Best Zip for Affordable Rent: 44117
Median Earnings: $33,819
Affordable Rent: $930

5) El Paso County, Texas

El Paso sits on the far western corner of Texas, right on the border of Mexico and standing on the Rio Grande river. El Paso houses multiple state parks, museums, amazing eats, trails, and the famous Plaza theatre.

Best Zip for Affordable Rent: 79924
Median Earnings: $27,119
Affordable Rent: $746

4) El Paso County, Colorado

Further west, number 4 falls on El Paso County, Colorado. With El Paso County falling in Colorado Springs, it is abundant in nature trails, hiking, rafting, and state parks. It also houses the Manitou Cliff Dwellings. It seems the trend with millennials is finding some peace and quiet in the quiet settings of Colorado’s abundant nature.

Best Zip for Affordable Rent: 80910
Median Earnings: $31,834
Affordable Rent: $875

3) Suffolk County, New York

Long Island, New York. More affordable than living in the city, and certainly not lacking activities to stay busy. With theme parks such as Adventureland and Splish Splash, it also houses the Robert Moses State Park, museums, and plenty of family friendly locations. After you finish your years partying in the city, you can start your family just across the way!

Best Zip for Affordable Rent: 11727
Median Earnings: $40,065
Affordable Rent: $1,102

2) Wayne County, Michigan

More popularly known as Detroit, Wayne County houses Hitsville, USA, pottery classes, science centers, sports arenas, and many other activities. It is the birthplace of Motown records, and the largest city in the midwestern state of Michigan!

Best Zip for Affordable Rent: 48219
Median Earnings: $31,020
Affordable Rent: $853

1) Honolulu County, Hawaii

It may come as a surprise that Hawaii is number one on our list since it houses a pricey market. With its lush forests, world renowned beaches, and never ending tropical sights year round, we can understand why anyone would want to live here.

Best Zip for Affordable Rent: 96792
Median Earnings: $35,863
Affordable Rent: $986

Now that we know where to go, it’s time to start investing! Get started today with AssetAvenue’s rental logan program at https://assetavenue.com/rental-properties

What are the Financial Benefits of Owning Rental Properties?

If you’re thinking of investing in the rental market, you might be asking yourself what exactly is in it for you? What do the financial benefits look like to owning a rental property? How much work is in it for me?

Rental properties can be a great real estate investment tool. Today’s market has reached an all time high for pulling out a mortgage. The next generation of homeowners are struggling to afford the down payments. The majority also seems to be experiencing wanderlust (a strong desire to travel), so the idea of settling in one place forever (aka, 30 year fixed is forever), is extremely unappealing. We are seeing a large rise in the rental market due to this.

With the conditions of the market, and the demand for rentals, the rental real estate investment market has found itself in the green. As a long term holder, you would be able to manage a rental unit and produce a positive cash flow each month. Say you are renting a house out for $1250 per month. Within a year you are generating a $15,000 gross profit. Whether you use it for saving, travel, or retirement, it can be a great source of extra income.

With the profits you make, you can renovate units in your building, whether you repaint them, add new flooring, new appliances, or landscaping the property, these will all increase the value of the property, allowing you to charge more rent, and increasing your profits.

But what about taxes? With rental properties, you pay less. You can deduct certain expenses from your income – reducing the taxes you owe.

The list includes:

-mortgage interest
-property taxes
-property management
-utility bills (if you include them in the rent).

The government offers preferential tax breaks for owners of rental properties, such as depreciation, which allows you to use paper losses to offset any profit you make on the rental. Losses generated by depreciation can also be used to offset other taxable income you might have. You can also write off all the other standard operating expenses that go along with owning a rental property: utilities, insurance, repairs and maintenance, yard care, association fees, and so forth.

Remember, owning a rental property also takes a good bit of work. If you have the right resources, tools, and skills, you will be making profit in no time.

Check out AssetAvenue’s Rental Loan program at https://assetavenue.com/rental-properties