Flipping houses can be a lucrative business for full or part-time investors. It consists of buying cheap, run-down properties to renovate and resell at a higher price. You can also simply buy properties rising in value, hold them for some time, and resell for profit. House flipping comes with risks, so it’s essential to research to avoid losing money.
You need to plan your spending as there are many costs involved in renovating. Besides the materials and labor, you need to account for closing costs and possible outstanding debts. Figuring out the amount to be paid can be a hassle, but you can click here to calculate closing costs.
Is House Flipping a Good Fit for You?
Despite what reality TV shows seem to imply, house flipping is a lot of work. You’ll usually be doing what the previous owner didn’t want to do themself to turn a dilapidated property into a move-in ready home for someone else.
If you don’t have much prior knowledge about renovations, you should consider if you’re willing to spend time studying and researching enough to be able to do it on your own or if you’d be better off hiring help. Make sure to adjust your time and budget accordingly.
If you’re low on cash, you can still go into business through some available options.
House Flipping Do’s
Research the Market
Compare different areas and their home values to find what best suits your budget, and consider the interest if you plan on taking out a loan.
Different neighborhoods may have wildly different starting prices, but you’ll surely be able to find cheaper options. They might not be so valuable, though, so compare prices with renovated houses in the area to figure out how much you can sell it for before buying.
In low-income areas, insurance premiums might be more expensive. You should also keep in mind that you’ll probably end up selling the property to a landlord for renting, so they may not be willing to pay as much as a homeowner.
Figure Out Your Business Plan
You need to know what you’re comfortable with and what requires too much work to fix. Think ahead about the renovation costs and if they fit your budget, and consider the time it’ll take for you to recover your investment.
Cosmetic updates are straightforward and a good starting point as a house flipper. Structural problems can give you headaches, having to deal with engineers and permits, so it’s best to avoid them, especially when you’re beginning your career in the field. Don’t aim too high at first. Start with narrower project margins on simple and quick projects.
Build a Network of Professionals
You must find lower-cost and dependable professionals to help you renovate your home, and asking for recommendations in advance is essential.
Some contractors might give you unrealistic time requirements, claiming to work much faster than they will, in reality. Some also can try to push up the price in the middle of a renovation, so knowing who you’re working with is paramount to avoid complications.
Home inspectors can provide help in evaluating what needs fixing or improvement in a house. Realtors can help you find the right properties and help you later sell them, so choose wisely. Attorneys and accountants can help you understand the taxes and provide financial and legal advice.
If you’re planning to start flipping houses, you must be aware of some common mistakes that can be your business’s downfall. Following the tips above will help you do everything in the best possible way to maximize your earnings and reduce your risks.
When done correctly, you can make a living out of it, and if home renovations are your passion, house flipping might be perfect for you.