The Top Things to Think About Before Buying Your Next Fix and Flip
Whether it started as a tiny convenience store or a rundown restaurant, purchasing a fix and flip business can make you plenty of money, but only if you choose the right project to begin with. Ask yourself these questions before you sign on the dotted line.
How Good Is the Location?
Perhaps there’s a reason the current business is failing. The best product or service in the world often won’t matter if the business is in a very dangerous or inconvenient area. You should also consider how far it is from you and anyone who will be working with you and whether a long commute time will cut into any other projects you currently have on your plate.
How Much Remodeling Will Be Necessary?
The amount of time and money you need to put into remodeling a business is also important to consider before you decide to fix and flip it. If the structure itself is solid and well-kept, new paint and fixtures may be all you need to make it look like new. However, serious structure issues, plumbing or electricity problems or other issues that could cause a remodel to be long and costly may mean you should move on to the next project.
How Much Time Do You Have?
Even if you don’t mind taking on a big project, you should consider if you have enough time to do so. Depending on where the business is located, purchasing one that needs major renovation during the fall months could mean the property sits vacant for several months while it is too cold for contractors to work. If you want a quick turnaround, purchase the business in the spring or early summer months, giving the contractors plenty of time to work and you plenty of time to sell it and make a profit.
What Is the ROI?
Even if you fall in love with a fix and flip project, you must consider whether it will have a good return on investment. You probably don’t have a bottomless bank account, so avoid properties that will cost more to fix than you will make in sales. Look to see how much similar properties in the area sell for and get a remodeling estimate to decide if the return will be worth the investment.
Fix and flip businesses are a terrific way to make money and, if you enjoy renovation projects, do something you love at the same time. However, it is important to have realistic expectations, especially if you intend to take out a loan to purchase a property. Always make sure you aren’t overestimating what you can do with a property.