You are looking to get into real estate market. And you think flipping houses is an easy way to make a quick profit. If this is the case, you are sadly mistaken. Process of flipping a house requires a lot of research, skills and time. It definitely isn’t as easy and fast as they make it out to be on reality TV shows like Filp or Flop. But it’s not rocket science either.
In this article you can find out about what it really takes to flip a home and make a profit. There’s a number of things to consider. The first thing you should know – it’s a risky venture. There’s a chance you’ll earn a nice profit, but there’s also a chance you’ll lose your investment and go into debt. So think carefully before making any moves.
Think how you are going to finance the flip
If you want to flip a house, you need to have sufficient funds to purchase the real estate you want to renovate and sell. The best case scenario is when you have enough money on your own to buy it and redo it. But if that is not your situation, you can look for alternative ways of funding. You can get a loan from the bank or you can find a partner. Bear in mind that if you enter a joint venture with a financially secure partner, you will have to split the profit.
Do you have the skill set for flipping houses?
Flipping houses is a complex undertaking. It requires a wide set of skills. You need to ask yourself the following questions before you start:
- Am I good at Maths? – You will need to do many calculations in order to make sound decisions about buying and selling. Good maths skills are of great importance.
- Am I good at repairs? – Unless you’re a professional carpenter, plumber, handyman or a contractor, you won’t be able to do the repair work yourself. Don’t overestimate your skills, or you’ll end up in debt and behind schedule.
- Am I good at interior design? – If you have a gift for redecorating, you can do without hiring a professional designer to help you with the reconstruction. Otherwise, plan on hiring one. Home buyers want to buy good-looking homes.
- Am I good at sales? – This skill can greatly affect your final profit. It takes a great salesperson to sell a property at a highest possible price.
It’s practically impossible to have all these skills, especially when doing your first flip. So you should assemble a team of experts to help you with the process. That team can include some or all of these experts, depending on your personal skills and financial situation:
- Money lender
- Professional home inspector
- General contractor
- Real estate agent
- Real estate attorney
- Insurance agent
Even though this might seem like a long list of expenses, don’t fall into the trap of thinking you can do it all on your own. You can’t. So save yourself the trouble, and hire the right people in the areas you’re not good at. Ultimately, they will earn you money.
Flipping houses is a full time job
Keep this in mind when deciding whether or not to undertake this venture. From the get-go, it will require as much time as a full-time job.
- Before the renovations you’ll need to get to know your city inside and out. You need to explore all of it thoroughly in order to find the best property to buy. This means a lot of driving around and talking to potential neighbors. They are solid source of information about the neighborhood and the property itself. You should set aside some time to find successful flippers and talk to them. You can learn a lot from their experience. Also, it will take some time to hire the right people to do the work.
- During the renovations it’s important to oversee the works. Unless you want your contractors to cut corners or freestyle your renovation. Give them specific instructions and make sure they follow through. Being actively involved increases your opportunities to learn from your first flip too. You’ll be better prepared for the next project if you spend a lot of time on your first one.
- After the renovations are done you’ll want to put all your time and efforts into selling the property quickly. This entails letting everyone know your selling. Tell all your friends, notify the neighbors, put up a for-sale sign. It will take time to stage the house. Open house days and numerous visits from the potential buyers will require time. Right up until dealing with paperwork to finalize the sale, you’ll need to be there.
It’s essential to sell the property as soon as possible
You don’t want to hold on to that property for long because it will increase your holding costs. And high holding costs decrease your profit. Holding costs include: utilities, insurance payments, town taxes, financing payments and similar costs. The longer it takes you to sell the house, the more they will add up. Hiring a professional real estate agent really pays off in this stage.
So as you can see, flipping houses is not an easy task. You need to be equipped with many practical skills. You’re not expected to have them all, but what you need to know is how to delegate and hire the right people. You should be meticulous and patient in your search. Read about the best real estate markets in the US. It takes a good negotiator to buy at low prices, and a good salesperson to sell at high prices. It’s necessary to be realistic in your calculations. And most of all, it takes a full-time commitment for the duration of the project. Considering all these factors, is flipping houses a job for you or not? Be honest with yourself.
If not, there are other ways of entering the real estate market. You can buy a beach house and rent it. Perhaps, you’re good at only one of these activities. If you are good at selling houses, think about becoming a real estate agent. And if you want more info on flipping houses, watch this video.