Do you ever watch reality tv house flipping shows and dream about making a big profit in weeks?
Real estate investors that purchase homes in need of repairs and cosmetic work can earn huge returns in a relatively short period of time. It’s important to keep in mind that house flipping involves work and careful planning in order to be lucrative.
There are financial risks involved as well, but if you follow the key steps outlined in this article, flipping homes can be an excellent way to make money quickly.
What is House Flipping?
Flipping houses involves buying a property, renovating it and selling it for a profit. In order for a home to be considered a flip, it must be purchased with the intent of selling it in a short period of time.
Step 1: Know Your Market
Getting familiar with the real estate market in your area is critical to the success of your flip. It will help you recognize undervalued homes with profit potential and ensure you don’t overpay for a property. It will also help you determine the price you should be able to list the home when you sell it.
Step 2: Set a Budget
How much do you have to invest? How much money will you need to borrow? There are excellent private lenders out there willing to finance your next real estate deal. Do not assume not having enough cash resources will rule out a possible investment. Learn more about fix and flip loans here.
Make a list of repairs needed and get quotes from contractors while setting your budget plan to ensure you will be able to profit after selling the property.
Step 3: Line Up Your Financing
When you find an ideal property for flipping, you will need to be ready to act fast. Talk to lenders BEFORE you are ready to purchase the home to ensure you don’t miss out on opportunities. Investor Loan Source specializes in short-term fix and flip loans and are able to get you pre-approved quickly. Having your financing available before you discover your dream fix and flip property will help you beat out other investors looking in your market at investment properties. If you are already considering purchasing a real estate investment property, consider getting pre-approved today.
Step 4: Establish Your Team
You need to start building relationships with contractors before you buy your first flip. Begin asking for quotes and estimates immediately after purchasing your property, or even better before.
Part of learning how to flip a house is building a strong network of contractors you trust and can depend on – general contractors, electricians, roofers, plumbers, painters, HVAC experts. Get to know several lower-cost, well-rounded handymen as well.
Unless you plan on doing the work yourself, your team of contractors are essential to the success of your flipping business. It is helpful to ask for references and to contact them ahead of time to ensure you are hiring a trustworthy contractor.
Step 5: Locate and Identify Your Property
Learning how to find good deals is critical. That means not only buying below market value, but with wide enough margins to cover your expenses.
There are many strategies to find below-market deals on homes to flip. You could work with a realtor to find on-market deals, work with wholesalers to find off-market deals, build a direct mail marketing campaign and so on.
Part of finding a good deal as a home flipper is patience. It may be tempting to act quickly on a property that is not ideal, but if the numbers don’t work or if the repairs involve more work, time and money than what you are comfortable with, it is best to keep looking. Be ready to act quickly on properties that are ideal, but be ready to walk away from properties that simply aren’t good deals.
Step 6: Buy the Property
Got a contract accepted? Wonderful! Now consider hiring a home inspector. The home inspector will help you ensure the property is structurally sound and that the mechanical systems are in good working order. You don’t want any expensive, unpleasant surprises.
Contact your team of contractors for quotes. Choose a contractor and schedule them to start work on the same day you settle on the property if at all possible.
Step 7: Renovate
Get to work! Time is money, so the faster you can complete the renovation project, the faster you can sell the property and pay off your loan.
Step 8: Sell It!
The final step of flipping homes is usually the simplest – selling it! You can usually lean on a realtor, but ultimately, you’re the one responsible for pricing properly; your profits depend on it. Make sure you understand the fundamentals of real estate pricing, before buying your first investment property to flip.
Once you sell the property, you can celebrate and enjoy the financial rewards of being a successful house flipper!