Despite its small population, Montana presents a unique set of challenges and opportunities for real estate investors. While there aren’t a lot of houses available to flip, it’s clear that if you find the right one, the rewards can be substantial.
The average revenue per flip ($162,340) is significantly higher than in most other states in the United States. This should pique the interest of first-time flippers as well as their more seasoned peers. There is money to be made flipping houses in Montana if you stick to your spending plan and focus on quality renovations.
Flipping houses in Montana
In order to begin house flipping, you must have a firm grasp of the fundamentals. You’ll have a better chance of succeeding and your financial risk will be reduced as a result. To get started flipping houses, follow these seven steps:
As a first step, get to know your area.
Investing in real estate takes time and research, both of which you should do before you begin. This home-buying process can be overwhelming, so enlist the help of an experienced real estate agent.
It’s a good idea to hire a general contractor to inspect the property once you’ve found the one you like. A rough estimate of work needed and whether or not the house still fits in under your budget will become clear with this information when flipping houses in Montana.
The 70 percent rule
Investment property buyers are often advised to use the 70 percent rule to determine a reasonable purchase price. To put it another way, this rule says that an investor should only pay 70 percent of the estate’s after-repair value (ARV). When the home has been completely renovated, the ARV is the value that it will have.
For example, let’s say that a $250,000 home needs $30,000 in repairs, and the ARV is $200,000. As a result, 70% of the ARV costs $140,000, leaving a balance of $115,000 after repairs. That house should cost no more than $115,000.
Evaluate Your Ability Levels
As a house flipper in Montana, you’ll need a specific set of skills. Knowledge of building construction, real estate, and design, for example, is a valuable asset. If you don’t have these abilities, it’s okay, but you’ll need to know where to look for those who do.
You should gather a team of specialists before you start flipping houses. Lenders, realtors, insurance brokers, and contractors can all be included in this group.
Your Project’s Financing
Determine how much money you’ll need for your project. Preapproval for a loan is a necessity if you don’t already have the funds needed to fund the project. For this, you will need a good credit rating and the financial institution may need a 20% down payment or some other form of collateral to secure the loan. Purchasing distressed properties through conventional lenders can be tricky and time consuming. Most conventional lenders have strict underwriting criteria which distressed properties in need of repairs do not fall under.
Hard money lenders such as 14th Street Capital offer short term fix and flip loans which use property value as collateral so you don’t have to worry about your credit rating or documentation to qualify for a loan and obtain financing for your fix and flip project in Montana.
Decide on a Residence and Purchase It
Finding the right property to flip is one of the most difficult tasks. As a result, you must take into account the potential resale value of the property in order to maximize your profit.
Fixer-uppers, foreclosed homes, and distressed properties are all viable alternatives to consider. However, you’ll need the assistance of a real estate agent and a contractor to determine the full scope of the work required when flipping houses in Montana.
To buy a house, you need to find the right property and then make an offer. You should expect some challenge if the house is an especially good deal. Check to see if you can afford the house even if you pay the full asking price.
Increase your sweat equity
Investing in equity could save you money if you’re unfamiliar with flipping houses and don’t have a large sum of money to work with. Whether it’s physical labor or mental exertion, this refers to the amount of time and effort you’ll devote to the project without compensation.
It’s common for new entrepreneurs to find that in the early stages, sweat equity is essential. What they need to keep going is the fuel they get from this source.
Listing the house for sale in Montana
It’s time to put the house up for sale after the repairs are done. Time is of the essence right now because the longer that home is on the market, the less money you’ll make. As a result, your primary objective should be to make significant changes as quickly as possible in order to maximize your return on investment when flipping houses in Montana.
In order to sell your home, you’ll need a real estate agent. The house can be listed in the MLS database by real estate agents. Their knowledge of the market and ability to help you figure out a fair price for your home’s eventual sale make them an invaluable resource.
Sources of funding
You’ll need money to flip the house before you even think about buying it. Purchase the property in cash if at all possible. You will avoid accumulating debt and paying interest on the house before it sells if you do this.
If you don’t have enough money to buy a house outright, you might consider pooling money with friends and family to do so. Some crowdfunding sites, also provide ways for you to get investors to fund your flip.
If you don’t want to take that risk, there are other options for financing your flip. Keep in mind that most mortgage products are not available for flipping houses. Banks prefer to profit from you paying off your mortgage over time rather than engaging in the risky business of house flipping. You’ll have to find another way to fund your flip.
Here are some options for funding your purchase when flipping houses in Montana:
- Cash-out refinance: If the value of your primary residence has increased, a cash-out refinance may be an option. You’ll take out the equity in your current mortgage and refinance to the amount you still owe with a cash-out refinance.
- HELOC : A home equity line of credit (HELOC) is a type of loan guaranteed by the equity in your home.
- Hard money loan: A hard money loan is a private lender’s short-term loan. These loans can last anywhere from 6 months to a year, have high interest rates, and require up to 40% down payments.
Along with the finances, you’ll have to pay for repairs and renovations after you buy the house. Make sure to budget for these costs, as they may be the difference between a profitable flip and a flop that fails.
Top cities for fix and flip in Montana for investors
While the finest real estate market in Montana is debatable, here is a list of cities where investors should pay special attention while looking for fix and flip:
Billings
This booming city is Montana’s biggest, and the median home value has been steadily increasing since 2011. The real estate market is expected to grow by another 4.7 percent next year, adding to an already stable environment for real estate investment.
According to recent data, the median house price in Billings is $237,900, nearly 4% higher than the national average. If you want to buy and sell, keep in mind that the median listing price is $249,900. In most cases, flipping a house for rent results in a monthly payment of $1,150.
Billings’ job market pays residents a median wage of $52,944, making average home prices affordable. The oil and mining industries have a strong presence in the area, which helps to keep the economy stable.
Bozeman
This extremely popular ski town is an excellent place to make a profit by investing in real estate. It should unsurprising that market values recognize property demand. According to recent data, the median home price in Bozeman is $436,800, with the majority of homes listed for $450,000.
Median values have risen 11% over the previous year and are expected to rise another 6.8% by 2020. As the industry continues to accelerate, purchasing now can provide a significant return.
Montana State University, which recruits over 3,000 people in the city, provides well-paying work opportunities for professionals. The city is also experiencing a technological boom, with large technology companies using it as a hub. The steady job market and an rate of unemployment of less than 3% is great news for those looking to invest in real estate in the area.
Great Falls
Great Falls, with a population of around 59,000 people, provides a small town atmosphere in the central region while still being close to major city amenities. The low cost of living makes this an excellent place to invest in real estate.
While the median household income is $42,237, homes are valued at $204,100, or $171 per square foot, which is lower than the national average. It’s also a hot rental market, with monthly rents averaging $1,200. Homeowners account for 70% of the city’s population, leaving a large portion of the population looking for a place to live.
The lack of interest from wealthy home buyers looking for properties is one disadvantage. Profit margins may be slimmer in surrounding cities, which offer more desirable conditions. Great Falls, on the other hand, is an excellent option for those looking for a low-cost place to start an investment venture.
Helena
Home values in Montana’s capital have been steadily rising, making it a safe place to invest in real estate. The current median average is $255,700, up 10% from last year. Within the next year, the market is expected to rise another 5.7 percent.
Helena’s stable job market offers a wide range of career opportunities to the city’s 31,429 residents. Public administration, healthcare, and educational services are the three most important industries. These markets will continue to attract top talent looking for a home in the area.
Helena’s economy is improving, and it’s becoming a seller’s market. With rising demand and low inventory, selling a home should remain competitive among potential buyers.
Missoula
Missoula is a thrilling place to buy because it has a pleasant combination of a laid-back environment and upmarket culture. Real estate investors should be aware that the present average home value of $304,300 is up 11.4 percent from the previous year.
Missoula sees a constant influx of students looking for housing because it is home to Montana University. Landlords can earn a median of $1,200 per month by investing in rental properties. The average pricing is $350,000, with a median home value of $304,200.
Selling expensive homes to local buyers is one problem property investors may face. Citizens earn an average of $40,630 per year, making some price tags prohibitively expensive.
Out-of-state home buyers, on the other hand, are a major reason for rising housing prices and population. Missoula is accompanied by over 60,000 acres of forest, making it a popular vacation or retirement destination.
Analysis of the Montana Housing Market
The difference between the median resale price of a Montana house flip and the state’s median home value ($320,998) is only a few thousand dollars. In other words, they’re looking for areas where the after-repair value will be higher than the original purchase price.
The median revenue per flip in the United States is just over $60,000, which is significantly higher than the average in most states. This amount rises to $124,000 in Montana. There is no doubt that house flippers are able to complete upgrades which have a major impact on the property’s value. The winning formula in Montana appears to be a combination of high-quality upgrades in desirable locations.
Renowned real estate websites reports that home values in Montana have risen by 6.8% over the last year. Since the end of 2012, house prices have been steadily rising. This is expected to continue in the near future.
Home values in Montana may have increased as a result of covid-19’s economic impact. While the supply of houses has decreased, the demand for housing has risen due to historically low-interest rates. Price increases are likely to continue until mortgage rates rise or more sellers enter the market.
Montana real estate is more costly than the U.S. average: Montana real estate costs on average $320,998. As a result, this is a lot more expensive than the average home in the United States, which is $266,222.
Bottom line
This process can be made much easier with the right team of experts. Work with a qualified real estate agent who can provide you with information about the local market and assist you in understanding the types of homes that buyers are looking for.
14th Street Capital, an experienced lender, can assist you in obtaining a hard money loan for purchasing, conducting repairs, and selling the property when flipping houses in Montana. Get fast, no-lengthy process hard money loans with flexible terms and minimal paperwork.