Flipping houses is a type of real estate investing that involves buying a property that needs repairs and is sold below market value. You then make the needed repairs and renovate the property so that it can be sold at a profit. There are a lot of TV shows about house flipping that make it seem like a really easy way to make money, but there is a lot about the business you may not know. Here is an overview of what you need to know about flipping houses.
Learn from people who have done it.
There is a common misconception that flipping houses are a way to get rich quickly or offers a passive income. While there is a lot of potential profit to be made, there is also a great deal of risk, and many people who are trying to get rich end up losing everything. Secondly, there is nothing passive about flipping houses.
Even if you hire all of the manual labor, you still need to be present to make decisions and ensure everything stays on schedule, under budget, and as planned. Experienced investors like David Lindahl produce real estate education programs for prospective investors or new investors who want to learn more.
Learning from people who have experience in house flipping either through books, classes, a boot camp, seminar, podcast, or a mentor is the best way to prepare yourself for the new business venture. The real estate market can be complicated, and your first deal, you may be worried about getting a good deal, but don’t let that worry stop you.
Know when to hire a professional.
Many people go into a house flip planning to do as much as they can themselves. When it comes to flipping houses, investors are split on whether you should do the work yourself or hire professionals. The key is to do as much or as little as possible, but you need to work it into the budget. For example, if you know you’ll have to hire a heating repair, you need to figure that expense into the budget when you buy the house. However, you also need to remember that selling quickly is essential, so if you can save time and money by hiring a professional contractor, that is the best route to go.
Understand how a profit is made.
A profit is only made when you can sell the house for more money than you put into the house. That includes both the buying price and the amount you paid to renovate the house. You will lose money on the deal if you pay too much for the house, go over budget during renovations, or fail to sell the house at the expected selling price when setting a budget for the project, figure in at least a 10% contingency because you will almost always run into problems you didn’t expect. You also need to plan for the worst-case scenario but work for the best-case scenario.
Make sure to sell quickly.
The faster you sell the property, the fewer expenses you will have in it. Every month you own the property, you pay the mortgage, taxes, insurance, and utilities. The faster you can get the renovations done and get the house sold, the less you will have spent, and the greater your profit. If you are a first-time house flipper, you may not know the marketplace as well as you need to, but working with a broker will help increase your cash return on the investment.
There is a lot to learn about flipping properties, but you know a lot of it as you go. Getting a mentor and taking some real estate classes when you first start will help you with the business side of things. Lining up contractors you trust to work with will also give you an advantage once you get started to ensure the project is done quickly.