A lot of people have become curious about house flipping, particularly about whether or not they would be able to make a profit doing it. Flipping homes is becoming a more and more common way to earn money in the housing market. While many people believe it takes a vast supply of cash to get into the business, there are actually several ways to finance the cost of purchasing a house to renovate and sell that can help almost anyone get started. There is inherent risk in home flipping, but for the right personality with the right experience, home flipping can be an incredibly profitable business. If you’re not sure where to get started or need some advice, read on for five important things to consider when you’re flipping a house.
1. Decide how to purchase a home.
The first step to flipping a home is acquiring the money you need to purchase one. Many people who get into the house flipping business have the liquidity to do so without borrowing money, but plenty don’t have the money to do so. If you don’t have the cash on hand, you can look for real estate loans like these fix and flip loans in Idaho. A flip loan isn’t the same as a traditional loan, so make sure to read up on what it means to work with a private money lender and how hard money loans work before signing on with a lender. Keep in mind that you can lose a lot of money if you aren’t getting a low enough price on the property, so it’s essential that you find the right property if you’re planning to work with a lender to fund the purchase.
2. Understand the local market.
You’ll need to know everything there is to know about the real estate market in the area where you intend to flip homes. Learn which neighborhoods are up and coming and where the best deals are. If there are design trends in the area, learn about them. You want to make the home you’re fixing up into a home that people will want to buy as quickly as possible, especially if you need to repay a hard money lender.
3. Learn about home repairs.
If you’re planning to fix up a home, you’ll need to make sure that all of its home systems work, especially the heating and air conditioning. If you don’t know what you’re looking for, bring a professional to help you. For example, here are five AC noises that should alert you to a problem, all of which a technician would be able to diagnose and repair. It’s a good idea to develop a good working relationship with local contractors and technicians who can help you identify and repair any issues you run into with the HVAC, the electrical systems, or anything else.
4. Research the “70% rule.”
If you’re unfamiliar, the 70% rule is a guideline that many professional house flippers use before purchasing a property. Real estate investors ideally do not ever want to pay more than 70% of the after repair value. This is a good way to make sure you’re not spending too much on a property and that you’re leaving yourself plenty of room to make a profit.
5. Search home listings and foreclosures.
Foreclosures are one of the best ways to find inexpensive homes to flip. Many of the most popular home browsing websites include options to browse foreclosures, and your local newspaper will also show local foreclosure listings. There are also easy ways to find bank-owned homes like searching for a particular bank along with “REO” or “real estate owned”. You should also consider using an online service to get a background check done on the home, to ensure the information you’re being given is accurate before you make an offer.
Getting involved in the home flipping business is always risky, but there is great money to be made if you know what you’re doing. Take your time and learn everything there is to know about the market in the area where you intend to buy and sell homes and stay informed about where people want to live and how they want their homes to look. You should also consider educating yourself on regular home maintenance as well, so you’ll understand how much work will be needed to repair the homes you look at. The more experience you have, the less you’ll need to pay others to evaluate things for you, which can reduce your expenses significantly. If you stay within your budget, identify and target attractive and under-market properties, and renovate them in a cost-efficient manner, you’ll be an expert home flipper in no time.