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REI made easy: How to spot a home with huge investor potential

The science of recognizing investment-grade real estate

Key takeaways:

  • Generally speaking, aim to buy the worst home in the best neighborhood around
  • Stick to properties with standard features and layouts to avoid alienating buyers. You want the home to appeal to as many people as possible
  • Change the way you invest—our simple step-by-step process lets you submit offers online while saving 100% of commission that would otherwise go to your buyer's agent

When it comes to real estate investing, home flipping has always been a popular option. But as margins in many markets continue to get smaller, investors need to either be able to take on DIY repairs or know contractors that will work for discounted rates. Having a better idea of what kind of homes to invest in can keep what's supposed to be a quick flip from becoming a never-ending money pit.

1) Know your market inside and out

What does the area around the home look like? More upscale surroundings generally yield a higher sale price, but will usually cost you more in initial investment. Look for homes close to local parks, museums, schools and amenities—that's where people like to live. The value gained from these locational factors is discernible by researching the values of other homes in the area. Remember, no matter how much money you pour into a property, it’s hard to outspend a bad location.

The general rule of thumb is to purchase the worst home in the best neighborhood possible. These homes tend to have higher appreciation potential than nicer homes in less stellar neighborhoods.

2) Know the home you’re considering

Things to keep in mind when looking at a home include when it was built and why it's being sold. While a distressed property, such as one being sold as a result of a foreclosure, will often be priced below fair market value, these homes can have hidden pitfalls. If the previous owner was not able to keep up with their payments, they probably skimped on regular maintenance and possibly other things as well.

Older homes can have similar issues, where they were repaired piece-by-piece over the years, resulting in a hodgepodge of plumbing or electrical issues that often require a complete overhaul to fix. Even if you have the utmost confidence in your abilities, it’s always wise to have a certified home inspector look at properties you’re considering to make sure you aren’t tackling a project that’s too big or expensive.

3) Stick to standard

While trendy custom features might attract some buyers, standard homes always sell best. Avoid purchasing homes that have non-standard features such as converted rooms, garage living spaces or highly unconventional floor plans. You want to offer a property that appeals to the widest variety of tastes.

Your time, money and effort should go toward repairs and renovations that add to the value of the property, not major rebuilds that merely bring the property up to baseline. Also, be sure to think twice before painting an odd pattern on the wall or installing that chandelier that looks like a fire-breathing dragon. While it may seem like a good way to stand out at first, you'd most likely only be limiting appeal.

4) Think big

Kitchens, bathrooms and bedrooms are what sell homes. Look for properties that are spacious and well-equipped in these areas. Unless you’re in a hot market, avoid properties that have less than three bedrooms—they’ll be harder to sell. Open floor plans, plenty of natural light and efficient interior design can make small spaces feel larger and more luxurious and simultaneously increase the home’s value.

Home Savi can help!

Whether you’re a first-time flipper or a hotshot investor, Home Savi can help you save time and money. With Home Savi, you get to keep all of the buyer’s commission instead of paying a buyer’s agent. Imagine recapturing 2.5%–3% of the purchase price of an investment property—that's money that can go toward your investment bottom line in whatever way you see fit.

Gain the upper hand

Our contracts are set up to put you in control of your savings. In competitive markets, one useful way to use your savings is to up your offer price by the amount you’re saving in commission. Essentially, this would allow you to "increase" your offer price by 2.5–3% and outbid competing offers. You already know the ins and out of real estate transactions, so why not represent yourself and save big? Get started today!

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