Flipping houses is the term used to describe the process of buying a home that needs work and is being sold below market value, completing the required work, and then reselling the house for a profit. This is a form of property investing, and TV shows have popularized it following professional house flippers. While the TV shows may make it appear easy to turn a profit and grow wealth, there is a great deal of financial risk in house flipping.
Here is an overview of everything you need to know to become a house flipper.
Buying
When the goal is flipping houses, you want to look for places in high-market areas that need much work. These homes will sell for below market value because they are not comparable to the other houses in the neighborhood in terms of their condition and value. The lower the buying price, the more room you will have for renovations and profit on the property. It is also essential to consider off-market real estate. Just because a house isn’t listed for sale doesn’t mean you can’t make an offer on the property. This is particularly true for empty properties. If no one is living on the property, you can look up the owner through the county auditor’s website and contact them to make an offer on the property. When buying a house, look at the bathrooms, kitchen, and high-ticket items such as new windows, doors, roof, and foundation.
Renovations
When you buy a house to flip, the renovations will be a critical part of the process. You want to make the improvement needed to get the highest selling price. However, you also want to spend as little as possible to get that selling price. The less you invest, the more room for profit. However, in some cases, spending more on the repairs will drastically increase the selling price, so you are faced with a financial balancing act. You need to know what repairs or improvements will create the most resale value. You can talk to professionals in the area for advice on this part of the process because it is essential. For example, companies that offer home improvement in Milwaukee would be perfect for advising you on what house features are the most sought after in that area. Contractors can help you make a list of home improvements needed and an overview of the whole process.
Timeline
The longer you own the property, the more money you will be spending on the property. If you got a loan for the initial investment, you are making a mortgage payment on the property every month. Even if you pay cash for the property, you are paying for utilities at the property and taxes and insurance on the property every month. While working fast is essential, you also need to consider the quality of work, the remodeling industry in your area, the third parties you’ll need to work with, the energy efficiency of the home, and the years of experience your contractors bring to the project.
Selling
Selling the house is when you make back your investment and see how much profit you will walk away with. The goal is to sell the house as quickly as possible and at the highest possible selling price. You won’t be able to sell the home for more than the bank appraises unless the buyer is paying in cash, so there will be limits to your selling price. However, if you approached the project correctly and stayed within your remodeling budget, you should make a good profit on the house. The real estate market will vary from one area to the next, so it is essential to work with a real estate agent with years of experience to create the market listing, talk to potential buyers, and work out the best real estate deal for you.
Finding an experienced property flipper to mentor you is also a great way to learn with a hands-on approach. You lend your skills to another house flipper for the opportunity to work on a flip from start to finish.
