1. Use a fantastic buyer's Agent; using the listing REALTOR® to purchase does NOT get you a better deal.
Using the listing realtor to purchase the property does NOT get you a better deal. This belief has been spread by less ethically sound realtors looking to make extra dollars. Even in a competitive seller's market, it does not give you the advantage. The listing realtor may tell you that if you write the contract with them that they will cut their commission to make the deal sweeter for the owner of the property and more likely to accept your offer. In multiple offer situations, if the listing realtor is doing this, they HAVE to inform all of the other realtors submitting offers that one of the offers coming in is theirs and that they are cutting their commission. Obviously with this information the other offers will be adjusted and it's no more likely that your offer will be accepted. Additionally, you will not be exclusively represented by the listing realtor. This realtor is also representing the seller, they can not possibly have both of your best interests in mind when writing up a contract and that leaves you vulnerable to financial and other losses.
It is very tough to be a buyer looking for a good deal in a competitive seller's market. It is important to have an agent that is working diligently on your investment opportunities. Seek out an agent that has the latest software technology that allows you to receive notifications and info about new listings before the general public. This gives you the advantage of being able to be first in line when you find the one that you want.
Be loyal to your agent. Your agent will be networking with every other realtor they have ever had contact with to find out if one of them has a listing that would match your criteria that hasn't come on the market yet or is being sold "exclusively". If you are setting up searches with multiple agents it is likely that they will find out. An agent who suspects that their client is working with other agents is much less motivated to spend their time and efforts helping you find a deal. They know that it is very likely you will purchase a property with another agent. As agents we don't get paid for our time, so it is very important on whom we spend it. As an investor, you are the golden ticket of clients, if we can count on your loyalty, you can count on us to go to the legal ends of the earth to profit you.
Post purchase, your agent should be able to give you advice in regards to the profitability of changes to the property like, adding another bathroom vs keeping one of the bedrooms or having a rec room in the basement vs an office and an additional bedroom. They should take in factors such as population, age and other demographics. When you are ready to sell your newly renovated home, you can be sure that the loyalty you have shown to your realtor will come out profitably for you and will continue throughout your business relationship.
2. Don't be fooled by what someone else is willing to pay for a certain property.
In charged markets like the one we are experiencing it can be difficult to not get caught up in the urgency and excitement when purchasing a home. Just because someone is willing to pay 'x' amount of dollars over asking price for a property doesn't mean that the property is worth what they are paying for it. Some people are willing to pay more than a property is worth to the average person because of sentimental or other crazy reasons. The property may not retain its' value or be profitable for the buyer, but sometimes they do not care.
Before putting in an offer for a property, you need to do a careful cost/profit analysis to determine your maximum offer price and you need to stick to it. Things to factor in as costs associated to flipping properties include and are not limited to realtor fees, bank fees, notary fees, title transfer fees, property transfer tax, estimated adjusted property tax due. Some of these things you will be paying twice as you will be doing two transactions with this property. Of course there are costs associated with the actual renovations to factor in like demolition and rubbish removal, materials and supplies, ticketed trades persons, permits, possible rezoning, and more. Once you have figured out approximately how much it will cost you to purchase, renovate and re sell the home, you need to get advice from your experienced agent about approximately how much that home will sell for post renovations. On that advice, you need to decide if there is enough of a profit margin for you to take on the endeavor of flipping that home, or at least enough to put in an offer.
3. Plan for setbacks.
There are so many variables to consider and think about when purchasing, renovating and then selling a property it can be intimidating. With the help of experienced professionals you can mitigate the risks as much as possible but there is always a chance that the unexpected can happen. Maybe there is a problem with the contract of purchase and sale that extends dates and costs you money in regards to property taxes, trades persons or other things. Maybe when you go to sell the property the buyer's inspector finds signs of an underground oil storage tank. Maybe there is suddenly a burst pipe or someone vandalizes the property. The point is that as much as we prepare for the worst there is always something that can go wrong. If you have a lump of cash set aside for just such an emergency you will able to deal with problems and issues more easily and effectively and with less stress.
4. Don't assume that the market will be the same from when you bought the property to when you are ready to sell the property.
The real estate market is not one market, but a collection of many smaller markets.These markets are ever changing like waves, but less predictable. What may effect one aspect of the market immediately and tremendously may only effect another aspect of the market minimally and much later, if at all. There are many variables that could effect our real estate market conditions. Such as; our government imposing foreign purchasing rules, banks changing their lending policies or rates, CMHC changing their regulations, our ever changing elected government officials. Even other countries can effect our market by changing their laws rules or government. A diligent realtor will help keep on top of what is currently going on and help you make financially profitable choices for the future.
5. Hire an inspector.
If you are considering flipping houses then you probably have a good general skill set when it comes to contracting and renovating. Most contractors do not want to hire an outside person to inspect a property that they have already looked over. The buyer for your renovated property IS going to hire an inspector. That inspector is trained to find many potential issues for the buyer and point those issues out to them. Even some issues that do not have to be big problems but they have a stigma attached to them that may scare the buyer away. Some things that can send buyers running are, signs of mildew in attics and crawl spaces, poly B plumbing, signs of an underground oil storage tank, asbestos in the attic, aluminum wiring and more. By hiring an inspector you can have the foresight into potential issues you may come across during renovations and avoid problems after offer acceptance that can collapse the deal.