Market Analysis (CMA) that will show you the value of all the comps in their completely fixed-up state. Renovations can vary from minor cosmetic fixes to major rehab. Your costs to renovate needs to include materials and labor, and should always take into account your end buyer. For example, if you’re flipping a commercial or rental property, your materials need to be within the span of what’s acceptable for that type of space in that type of market. However, if you’re flipping a residential property, you’ll want to make sure you do some upgrading to make sure you include the features buyers in that area are looking for. To keep costs low, make sure you shop around. Big box stores often have great deals, but you can also find many things you’ll need at rehab stores and liquidators. Your contractor may be able to help you find great deals as well. Speaking of your contractor, you’ll want to keep in touch with them and supervise, as needed. You’ll lose time and money if the work has to be redone, regardless of whether it’s due to a mistake or if it’s simply not up to your standards.
DETERMINING YOUR RETURN ON INVES N INVESTMENT
There are two main methods when it comes to ROIs: the cost method and the out-of-pocket method . Let’s look at a couple examples, keeping in mind that the ROI for both involves dividing the equity position (the amount sold minus the amount invested) by the total amount invested:
(equity position) ÷ total investment = ROI
The Cost Method
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