Flipping homes is a serious business for expert real estate investors. It can be exponentially rewarding when you shell out your money to worthy fix-and-flop projects, but the road never goes on a straight line. It’s a tricky road to navigate, especially for beginners, as many get stuck just trying to figure out how to flip for the first time.
What is House Flipping?
House flipping defines real estate investors that purchase properties at a bang for the back price at auctions for the purpose of reselling them later on for a hot profit. It can be a lucrative business when done right, but falling into money pits down the road will turn your house flipping into one big flop.
What are the Steps You Need to Know When Flipping Houses?
1. Prepare Cash to Finance Your First House Flip
The first step to flipping houses is to finance the fix-me-upper with your own pocket money. That’s why it can be a risky business, which is why it’s better to flip the house with cash. Adding loans into the mix will only deepen the danger as a flop can instantly bury you in debt.
Not to mention, flipping with debt means you have to pay interest for months, forcing you to increase the price tag of the house down the line just to break even. If you can’t sell the house within your agreed deadline with your lender, you’re cornered to cut your original price and compromise your profit just to beat the clock.
2. Know Your Budget for the House Flip
The best time to start computing the budget for the house flipping process is now. Don’t wait until you bought the property, it’s in your best interest to evaluate the price range for buying a home, the repairs it involves, what the renovation project entails, and more before you officially seal the deal.
This includes assessing the property for any cosmetic projects, which can make or mar a property’s first impression on the market. Stay vigilant with infamous money pits such as expensive overhauls like electrical or plumbing issues, which has the tendency to flop your flip.
3. Get to Know the Market
One of the most important factors of a successful house flipping is knowing the market inside and out. Charging headfirst into the market without knowing the trends means you’re making deals blindly, along with the fact that it’s virtually impossible to accurately identify the property’s potential value.
After all, the hot deals you’ll offer should be suitable for the reality of the neighborhood. This means that you need to consider whether or not the residents of the area can actually afford the home you flipped.
One of the best ways to solve this issue is to hire a real estate agent with reliable experience in your area. They will be able to identify problems from miles away and help you hone in on the right housing target based on your price point, budget, and overall bottom line.
The Bottom Line
Getting your foot behind the door of real estate investing, especially flipping houses, is not as straightforward as it seems. It involves plenty of back-breaking effort, most of which involve capital-intensive tactics.
The method requires you to shell out cash to buy the house, make improvements, and hope that all the money is worth its value once you place the property back on the market. Seeing as it can be a tricky business to navigate, the guide above should help ensure you’re off to a smooth-sailing journey to your first house flipping.