Flipping properties is the art of buying, renovating, and selling homes for a profit. However, to be successful in this industry, precise planning and analysis of each investment are crucial. If you’re not sure how much you’ll earn on a given property, it’s best not to risk it! In this article, I present the Investment Success Formula®, which will help you assess whether a given project is worth pursuing.
Why is profitability analysis crucial?
Flipping requires you to know how much you can earn on the property and the exact profit amount the day you buy it. Rule number one is: buy at least 20% below the average market price. Then, sell the property to achieve your target profit.
How to estimate the profitability of an investment?
To answer the question of whether a given property will make you money, you can use the Investment Success Formula® , which I use in my business. Here’s how it works:
Investment Success Formula®
CS – KO – KK – KOB – Z – R = CZ
Explanations:
- CS – Selling Price
This is the projected price of the apartment after the renovation is completed, estimated on the basis of a thorough market analysis. - KO – Purchase-related costs
This includes fees such as agent commission, notary fees and civil law transaction tax (PCC). - KK – Loan-related costs
If you use financing, include interest, commissions, insurance and bank fees. - KOB – Operating Expenses
These include rent, utilities, advertising costs, cleaning, design and other expenses related to maintaining the property. - Z – Profit.
Factor in your projected profit during the calculation phase. This is important to determine how much you can afford to pay for your apartment and still break even. - R – Renovation Cost.
It’s crucial to accurately estimate the cost of renovation work. Unexpected expenses can significantly reduce your profits. - CZ – Purchase Price
This is the maximum amount you can pay for a property to make the investment profitable.
The key to success: cold calculation
If the final result of the formula shows that the purchase price exceeds your budget or reduces your profit, it’s better to abandon the investment. Flipping requires financial discipline and a strategic approach.
Consult your investments
Have questions about the Investment Success Formula® or want to talk about flipping properties? Contact me – together we will analyze your investment plans and find the best solution. wojciech@jakflipowac.pl
