Planning on Flipping a Home? Start Here
What Is House Flipping?
House flipping is when investors purchase homes, fix them up or renovate them, and then resell them down the road for a profit. This can be a wonderful method of making money; however, there is a fair amount of risk involved. The gamble becomes even dodgier if you are not sure of what you are doing, and it can be terribly costly if you make a poor decision.
You can find some incredible bargains on the real estate market, but thanks to tighter lending standards, you’ll need plenty of cash and nerves of steel to get into house flipping. Remember, until you can sell the house you will have to pay your rent or mortgage, plus the mortgage for the new home, and utilities, insurance and property taxes.
What do you need to get started?
First, you will likely need to have an outstanding credit score. Lenders have stiffened their requirements for some home loans, most notably if you want a loan for a potentially risky house flip. You will also need cash, which will likely be used for a down payment, or on any initial renovations that are required to freshen up the home before you put it back on the market. If you have enough in savings and find a real bargain on a home, you can buy the property, and take out a small loan or line of credit to pay for the renovations.
It will also help if you know the real estate market. You want to try and buy a home in a desirable location, fix it up, and sell it at a profit as fast as you can. To sell the home quickly, it must be located in a great area. The longer it takes to flip the house, the more money you’re going to waste on monthly mortgage payments, payments for insurance, and property taxes.
How Do I Flip a House?
1. Educate Yourself: You can’t simply find a modest house online, purchase it, and then sell it for more money. If flipping were that elementary, we’d all be multi-millionaires. The truth is that you must educate yourself before you even start looking at homes.
2. Obtain a Mentor: If you know an experienced house flipper, ask them to be your mentor. You may even want to consider offering him or her an incentive to mentor you.
3. Research Listings: Once you find a home you want to buy, check out that home’s background online. These days, there are numerous places online to review details about the house’s history, including repairs and additions.
4. Make an Offer: Once you find a home that suits your needs, you’ll then want to make an offer. If it’s a charming house selling for a reasonable price, you will probably have competition. Many people flip houses full-time, but you can beat the competition by targeting a neighbourhood and going door-to-door.
5. Re-list and Sell: The truth is that most house flippers will eventually end up listing their homes with a Realtor. Realtors live and breath real estate, have access to buyers and can put your house in the MLS database. They also know the market conditions and have the skills and network to get you the best price.
Have you been involved in flipping a house? If yes, was the profit you earned worth the effort and the experience? What upgrades or renovations did you make to the home?