Flipping Houses in Fort McMurray
You’ve seen it on HGTV
, and people used to do it around here.
The idea of buying a property, fixing it up, and selling it for a profit is inherently exciting!
But with people all around us foreclosing, you’re probably asking yourself if the potential profit is worth the risk? We’ll give a definitive answer to that, but first, let’s start with the basics:
What is Flipping?
In a nutshell, flipping houses is buying and selling for profit, without renting it out or profiting from it in any other way. Usually buyers improve the property, but not always. It usually happens quickly (to minimize carrying costs).
We find flipping in pretty much any market for assets.
Flipping real estate is a form of real estate investment that requires skills, capital and sometimes the investor’s labour in order to realize a short-term gain.
The key to a successful flip is to sell for a higher price than the total cost of the finished property (including improvements). In fact, the best flips happen when higher goals than that are achieved (but more on that later).
Here are some of the sources of profit:
1. There may be a market gain (the market goes up)
2. We may purchase the property for less than it’s worth
3. We may sell it for more than it’s worth
4. We may do better renovations with fewer inputs than market competitors
By the way, items 2 & 3 together are what economists call “arbitrage”. This is golden - benefiting from trade by buying low and selling high. These profit signals tend to draw in buyers to an opportunity. When they abound, expect lots of competition. Having market insights and knowledge/information that others don’t have is the key (and being more proactive & reactive).
What are The Steps in Flipping?
How to Determine if it Makes Sense for You?
Flipping homes isn’t for everyone! Sure, there are often opportunities to make money. But have you thought of all aspects before moving forward? Ask yourself these questions:
Do you have a lot of capital in case of emergencies?
Is everyone in your family on board with this idea?
Would your financial advisor support this decision for you at this time?
Do you have the skills and know-how to make a profit where others don’t?
Are you calm under extended periods of extreme pressure?
Do you have (or can you quickly build) a network of trusted contractors?
Are you an effective decision-maker?
Are you prepared to lose?
Do you have lots of spare time?
Do you have lots of spare energy?
Count up how many "Yes's" you answered, and check your results:
1-4 Yesses: Flipping heck, no! Flipping real estate might not be for you. Contact us for a consultation on how we can work together to assess your real estate strategy.
5-6 Yesses: Flipping maybe! Flipping real estate may be for you, but we’re not sure yet. Best to continue researching and exploring. We’re here for a consultation if you’d like help.
7-10 Yesses: Flipping great! This could really work out for you. Let’s chat for sure. Check out the rest of this blog then let’s have a conversation.
Trust me. I’ve been there...
Many of these questions come from my professional (and sometimes personal) experience of flipping homes. I myself have usually done well, but not always. All of the agents on our team have years of experience we can lend you, so you don’t need a score of 10 (more on that later), but you can see how some people are more suited to flipping than others.
Is the Timing Right for Profit?
Short answer: Yes (at the time of writing)
Early on in your process, it’s better to spend time in the blog section of our website, than the search section, in our experience. As part of your planning phase, please read at least 5 of the blogs I’ve put together in our market research section for you.
As you read, you will see that, although of course, the future is uncertain, there are plenty of people buying homes now in the lower price ranges (including investors). Our clients also receive a private, monthly market report in their emails, by the way.
I recently helped someone purchase a townhome without condo fees for under $200,000. This was the lowest priced sale of a comparable property since July 2004 - it wasn’t even in really poor condition! Also this year, I’ve helped two people buy very well priced duplexes in Thickwood (no condo fees) for under $250,000 (one was a PWF foundation). I have clients flipping right now, and we know of several people who have flipped properties recently.
This being said, you do have to be smart about it...
10 Essential Tips for Flipping Real Estate in Fort McMurray
1. It’s business:
You’ve probably bought a home before otherwise you wouldn’t likely be reading this. But this time it isn’t personal. You’ll maximize profit by removing your heart from this process. Put it into the reno’s, but only after you’ve bought it. Then extract yourself emotionally before you list it for sale.
2. Invest in something small, with no more than one challenging feature. When you go to sell later, buyers can often get past one thing (e.g. busy road), but add another issue and you could be setting yourself up for failure.
3. Do the math. Before you start, calculate the expected purchase and sale price (we can help with this), project cost, timeline, etc. Add in a 15% contingency for improvement costs, and don’t forget carrying costs and closing costs (on the buying and selling sides). Divide the expected profit by the hours you’ll be putting in. Compare this to other options. Is it worth your time and risk to make that kind of money?
4. Great bones. Choose a property which you don’t expect to have issues with later. Great professionals (REALTORS®️ & home inspectors) are a great asset, but so is intuition.
5. Consistency. “Renovation” comes from latin and means “make new”. Buyers are used to seeing new or nearly new homes that don’t have nasty surprises. Keep your trims, lighting, flooring and paint colours consistent. This teases first-time buyers (with their healthy budgets) away from those newer homes!
6. Design sells! You need to create a “must have” product. Sure, make everything consistent, but what about exciting features? We have 6 agents who can consult on this. Some of our clients have spoken to all of them! Pinterest is an amazing resource, too.
7. Remove issues. Oftentimes there’s more money to be made by removing bad things than adding features. For example, find a home with 2 bedrooms upstairs that used to have 3 bedrooms upstairs. You could make a big gain just by putting that wall up again.
8. Quote everything. You might have long-term contractor relationships, but you’re in business now. Get prices and hold people accountable. You might end up being one of their best clients, after all. And besides, profit is about low costs and producing high value.
9. Time is money. Information is power.
10. Hire a legendary team. Hire an agent (or team) that you know will have your back and has the expertise, connections and resources you need. It has to feel right. I can confidently promise that we can surpass your expectations. You’d work with a specialist buyer’s agent, then a specialist listing agent, and you’d have access to the whole team (and all our knowledge) for much of the process. Feel free to call us to interview us.