House flipping is a trendy business model that many people want to start with. Depending on the market and your property-flipping skills, you can even double your original investment which means that this business is very profitable.
However, starting a flipping business is not as straightforward as it seems. Since you will be dealing with high investments, a minor mistake can take away years from your profits.
That is why you need to do quite a bit of research and make sure you fully understand the process before investing.
In this article, we will go through some of the best tips you should follow if you want to start your home flipping business.
1. Understand the flipping business
Just like any business you ever start, you need to understand how things work entirely. Seeing the bigger picture will allow you to build a successful business out of your idea. First of all, this is not a get-rich-quick kind of business. Property flipping takes time and requires pretty hefty resources at the beginning, unlike online businesses that don’t require a significant upfront investment.
The process has a few steps, such as:
- Finding and buying the right property (you will improve your property scouting skills over the years)
- Prepping and renovating the house (this step will add additional value to the home)
- Market and sell the property (it could take a while depending on the market and the property)
2. Study the Market
Estimation is crucial in the property flipping business. For example, if you see an old house that might go cheap, and you know the market estimate for that house, you can easily calculate your profits and decide whether or not it is a good idea to buy the house.
A deep understanding of the real estate market, property value, and local home prices are critical for creating a successful flipping business.
3. Budget Limitations
Since we are talking about property investment and restoration, be prepared to stay close to your budget since one minor thing can make you go over budget. If you are paying with cash, you have to know your limitations on how much you can afford to put toward the purchase, as well as the renovations and still be able to make a profit.
On the other hand, if you are financing the purchase, it is a good idea to get pre-approved for your loan. This will give you additional information about the loan amount you will be working with. Avoid going close to the “break-even point” in your budget and always add at least 5% for unexpected costs.
4. Finding the Right Property to Flip
We touched on this subject before, and it is about your property flipping senses. The best way to build a profitable flipping business is by finding the best properties to flip using the best way to get construction leads. Properties with best flipping characteristics are those who don’t take too much of your time, can quickly sell, and can be found cheap on the market.
If you flip a property fast, that will leave you with more money for your next flipping project. Avoid properties that are hard to sell, even when there is a chance for high profit. The recipe for success is finding a property that can increase value faster than a horse in the Kentucky Derby odds. Since you are just starting with this business, you cannot invest all your money in one property that is going to take too much time to sell.
5. Follow the Golden 70% Rule
There is a standard rule in the property flipping business, which gives you the potential to flip properties and still make great profit. You should never pay more than 70% of a home’s after-repair value if you want to make a profit.
These are some of the tips for starting a successful property flipping business. It is an exciting business with a lot of potentials. You should research the