With any type of investment, risk and potential gains are generally proportional. House flipping is no different, as it can yield significant profits, but there’s a good deal of risk involved.
Doing your due diligence before any home purchase—no matter how appealing it looks at first—is essential to mitigating the risk and getting the best possible estimates of your costs and potential profit. This means close inspection of the condition of the home, its positive and negative selling characteristics, the local housing market, and more. It also helps to know how to find good deals on real estate.
You must also take a thorough look at the home’s location. This includes the street it’s on, its neighborhood, and the larger surrounding area.
To successfully flip a home, its location must have stable or rising property values; if they’re on the decline, this can easily counteract the improvements and upgrades you make on the home itself. But the location also needs to be highly appealing to buyers in general to improve your chances of reselling within a reasonable time frame and for you to receive an offer on a relatively high asking price.
Tips for Evaluating the Location for a Home Flip
When you’re evaluating the location for a home flip, here are some important questions to ask:
- Are property values in the area rising? If not, this isn’t a good place to invest.
- Are comparable homes nearby selling quickly and in the price range you’ll need to sell?
- Is the home in a good school district? This is one of the most important considerations for buyers with children or planning to have them. It’s also a good indicator of the general desirability and stability of the region, and it’s correlated to high home values and low crime rates.
- Do you see signs that other residential and commercial property owners in the area are investing in improvements to their properties? This indicates that others have pride in their properties, and that values are probably on the rise.
- Do you see a lot of vacant storefronts in the retail spaces in proximity to the home? This is a significant red flag if you’re looking to flip. Of course, this doesn’t apply to new construction. Which brings us to…
- Is there new residential and commercial construction close by? This is a promising sign of high demand for the location, improving convenience factors, and rising property values.
- Are the other lawns and home exteriors on the street and in the neighborhood well maintained? It’s important that the home’s surrounding properties have curb appeal too. If properties are headed downhill, so are property values.
- Is the home’s street a high-traffic thoroughfare, or located immediately off of one? If so, this will work against you at sale time.
- Are the street lights around the home working? Are the streets and sidewalks clean and well maintained?
- Are there shopping centers, grocery stores, dining options, medical and professional services, hospitals, and public transportation close by? People want convenience.
- Are there other shopping, entertainment, and cultural options nearby, like parks, specialty stores, coffee shops, breweries, a farmers market, malls, movie theaters, gyms, sports facilities, museums, theaters, live music venues, and so on? People want easy access to these lifestyle amenities.
- Is the home too close to an airport, factory, stadium, public event venue, string of bars and nightclubs, highway, or other sources of noise, litter, pollution, bad smells, heavy traffic, etc.? It’s hard to successfully flip a home with something like this deterring buyers and reducing offers.
- Is the area walkable and bike-friendly? While this is more important in urban areas, these are characteristics that make any area more appealing to buyers.