Ryan Serhant, star of “Million Dollar Listing” and author of “Sell It Like Serhant,” shares his tips for selling a house fast and what to look out for when buying a flipped home. Here, the real estate expert explains what anyone hoping to flip their home for a profit needs to know.
“What I tell people thinking about flipping a home is to think like a buyer,” Ryan says, advising them to take a step back before focusing on the home itself.
“A lot of my clients see a great teardown or a property that's in incredible need of repair and say, 'That's a great deal. If I fix it up, I can make this much money,' but they forget what buyers are looking for,” Ryan says.
So what should you focus on first?
Location, location, location.
Buyers should have a place in mind where they want to buy before they start looking for properties online or attending open houses to tour properties, so when you're trying to buy and resell a home, you'll need to do the same type of research that a potential buyer would.
Ryan says you should look at the location and then focus on what is important to people considering moving there.
If there are schools nearby, are they in a good school district? Is the area urban enough that owning a car is a luxury? If so, consider how close the property is to public transportation. If it's in an area without easy access to public transportation, is there ample parking on the street? Better yet, does the home have a driveway or garage? Is the garage covered or open?
These are questions to consider before tackling any home renovations.
Follow the 70% rule.
Once you're confident in the property's location, Ryan suggests using the 70% rule to help you, the investor, determine whether the home is worth investing in.
After Repair Value, or ARV, is the value of a home after it has been fully repaired, he explains. The 70% rule states that investors should never pay more than 70% of a property's ARV minus the cost of necessary repairs.
Here's an example: If a home has an ARV of $150,000 and needs $25,000 in repairs, the 70% rule means that an investor must not owe more than $80,000 on the home to resell.
$150,000 x 0.70 = $105,000 – $25,000 = $80,000
Good to know!