23rd November 2020
So you want to become a house flipper? The risks and rewards of creating income from house flipping will depend on how well prepared you are for the flip.
I’ve created a list of items that will guide you as you do your research on “How to Flip Houses” and will help you prepare for success once you get started.
I not only have an expert grasp of the real estate market and thus can gauge how well a flip will do, but I’ve also successfully flipped houses myself and know the ins- and out- of making the endeavor profitable.
Find a property in an area you are familiar with. This will help you know that the area is desirable and will warrant good pricing once it’s renovated. It’s also important to know the comparable sales in the area for renovated homes with similar square footage and lot size. This will help you plan for an appropriate sales price and profit margin for your flip.
Unless you have cash for the project, make sure you partner with the right lender since you’ll most likely need a construction loan. Construction loans are different from conventional loans, so it is important to choose a lender that will help make the construction process easy and successful. You should be aware of the fees they charge, the monthly payments (carrying costs), and how you will get the loan paid out for work performed during construction. Often lending institutions require flippers to have upfront cash to pay for product and labor and then will reimburse once the work is complete. This can add up to a lot more carrying costs than most anticipate. So having a lender that can help you plan and walk you through the funding process is critical.
Since the main goal of flipping houses is to make a profit from your investment it’s really important that you set a budget and stick to it. Otherwise, you’ll start cutting into your profit. Base your budget on the fair market value of the property once completed and make sure you leave yourself enough room for earnings beyond that.
Finishes on a flip can be the most important thing that makes you top dollar on a sale. Choose a contractor that does excellent finish work (and they’ve got to stay on schedule!). Also, make sure you don’t under or overdo it with your finishes as the quality and expense of the finishes should match the home price. Finish the space with well thought out design details that are in alignment with current trends. Also, plan for items such as beautiful landscaping and home staging that compliment the property. If your property is shown in the best possible light it will help you get top dollar with a sale and increase your profit.
It’s important to time the construction so that it’s complete and ready to be put on the market during a good time of year for a sale (preferably not around holidays). You don’t want to have your property on the market during times when people are not house shopping which could drag out the timing of your sale and cut into your profit.
Being prepared and armed with knowledge can help your house flip experience be not only profitable but also less stressful. If you’d like more information about any of these tips please contact me, I’m happy to help with the flip!