So, you've decided to get in on the house flipping game to try and make some serious cash. We wish you the best of luck, but if you don't know the tips and tricks you need to succeed in the business, all the luck in the world won't help you.
So what are these fabled strategies and what methods should you avoid so you don't end up losing money?
Funny you should ask, as we have this beginner's guide on how to flip a home right here to help answer any questions you have! But enough of this preamble stuff, right? Let's dive into things!
Don't Flip a Home Before Doing Research
The first thing you should do before even looking at potential houses to flip is to do your research on house flipping and the state of the housing market. For example, going into house flipping when the real estate market tanks aren’t going to net you the big bucks.
Look at which areas of the country bring in the best profits for house flipping. A recent survey showed areas like Sioux Falls, South Dakota, and Tampa, Florida coming in as the top spots, while cities like Newark, NJ ranked much lower on the scale. You should also have a scale of how the wealth levels of different areas operate (high-class, middle-class, etc.) so you know the best spot to flip.
It's also important to understand the ins and outs of buying and selling real estate. Knowing the laws and regulations you have to follow helps keep your business out of accidental legal trouble. You can also consult with real estate investors to get tips or utilize their services as part of your flipping team.
Get Your Budget In Order
Once you've mastered the fundamentals, you need to start assembling the funds you need to purchase your first property. If you have the finances to use cash to purchase a property wholesale, take that route. After all, this way pesky things like accumulated interest and loan payout don't interfere with your flipping.
If pure cash isn't an option, consider looking into hard money loans. They pack high-interest rates and short payback periods but are useful for getting money fast if needed. You can also look into getting a home renovation loan from Plenti, which skips the usual difficulty with getting mortgage loans on a property you want to flip (since those get seen as less reliable bets by banks).
You should also take note of what you'll need to pay to restore and improve the house. You'll also need three sets of homeowner's insurance (a Vacant Building Policy, a General Liability Umbrella Policy, and a Builder's Risk Policy) for as long as you own the property. Having some backup funds in case the plan goes off-track is always a good idea too.
Build Your Team
After that, it's time to start assembling the team of people you'll need to flip your house. You'll want someone to lead the renovation efforts, as well as getting a full crew of builders, painters, electricians, etc. in to perform the work. You should also consider bringing in a real estate agent towards the back half of the flipping process to aid you in finding a buyer.
While it's tempting to save costs by assuming full command of the project, try to divvy out the work more. You're not as experienced as a good contractor, and splitting your focus across too many areas leads to an inferior house.
If you do decide to take up contractor responsibilities, make sure to foster strong relationships with any subcontractors you bring in. If they do excellent work, you'll want to keep them on for future projects so you don't have to reassemble a team the next time you want to flip a house.
Pick the House and Strategize
With the team assembled, you can start looking at potential properties to buy and flip. The ideal house is a property in a high-market area with a low price that won't require much turnaround time to flip back onto the market.
Homes with big-tier problems like foundational damage will prove cheaper buys, but you'll have to account for the cost of the extra time you'll spend fixing it up. Home size is also a bigger factor, as the more square feet of property you have, the longer it takes you to renovate.
Once you've landed the property, make sure your team's ready to go as soon as the sale clears. The longer you wait to start flipping, the less money you're going to make.
Sell For Profit
Once all the kinks get ironed out of the house and everything looks brand-new, it's time to sell it. Note the current prices similar houses sell for and try to keep your price in the ballpark of those values. Overinflating your home's value scares away buyers.
You'll also want to utilize multiple platforms to get the word out about your property. Real estate websites, newspaper ads...the more people know about it, the more likely you are to get a premium buyer.
Mistakes to Avoid
Of course, certain actions will doom your house flip right off the bat. Going for a property you don't have the initial funds for but plan to recoup over time is a bad choice. After all, you have zero wiggle room if something goes wrong.
Taking too much time to turn a house around or doing a rushed job on renovations is another way to see your investment dry up. Finally, make sure you know how to handle selling the house, lest you end up with a property you're still coughing insurance money up for with no buyer in sight.
Road to Riches
And there you have it! Now that you have this beginner's guide on how to flip a home, you're ready to get out there and carve your path in the house-flipping world! And for more tips on handling the ebb and flow of the real estate landscape, make sure to check out the other posts on our website!