One of the best ways to make money in real estate is to buy a home, fix it and resell it for a tidy profit. Thousands of real estate investors have made money by flipping houses. If you are also considering dipping your toes in the real estate industry, here are the best ways to fix and flip a house.
Tips to Become a Successful Flipper
It’s true that there is a lot of potential in the real estate market, but it also means that there is a lot of competition. In simple terms, anybody can become a house flipper but become a successful flipper is another thing.
Before you start flipping real estate, you need to make sure that you have an excellent credit score and access to cash for down payment. Also, you need to be aware of the current trends in the real estate market to buy the right property at the right price.
The most important thing you need to keep in mind is that to make money in the real estate market; you need to buy a property at the right price. The only way to make money as a flipper is to buy a property to which you can add some value and resell it to make money. You will also be spending money on improvements, and if you buy a property at the full retail price, you will find it difficult to make money as a flipper. Therefore, you need to do your research and make sure you never buy a house at the full retail price.
Finding the Perfect Property
Before you get too excited about finding a property that you think is going to make you massive amounts of money, you need to get good at making accurate cost estimates. You need to know how much money you’re willing to spend to repair and market it. You will also need to come up with an accurate timetable as you will have to hold on to the property for some time and time costs money.
While estimating your costs, you also need to include the cost of tools, labor as well as building materials. You will even have to pay money for insurance, commissions, marketing, taxes, and mortgage payments. So, you need to fix the budget before you start in this market.
Navigating the Down Payment
You will also need access to cash for down payment. If you go through a traditional lender, you may have to pay at least 20 to 25% as down payment to get the best mortgage rate.
Successful flippers have a lot of contacts in this industry, and they have an eye for good contractors. It’s not easy to find a reliable contractor who will make the necessary repairs at the right price. Therefore, before you start looking for a property, it is essential that you find a reliable contractor. So, do your research and ask for references before you finalize a contract.
One of the biggest mistakes made by inexperienced real estate investors is that they look for an inexpensive house without paying any attention to the neighborhood. Location is critical as you will find it hard to find buyers who will buy a property in a not so good area. It’s important to keep in mind that buyers won’t necessarily line up to buy a house even if it is priced low when it is not in a good neighborhood.
You should also try to do as much work on your own as you can. If you are great at home repairs and have the necessary tools, it is recommended to do all the repair work yourself as it will save you a lot of money. However, take up the repair work only if you are good at it as bad renovations won’t excite prospective buyers.
Budgeting for Renovations
If you want to make money by flipping houses, you need to ensure that the money spent on repairs is spent well. You’re not going to make any money in case you spend USD 50,000 on repairs and try to sell the house for USD 400,000 in a neighborhood where the average price is only USD 300,000. In other words, do not overspend.
On the other hand, there are several ways you can add value to the property while keeping your costs low. For instance, you should consider spending little more money on plumbing fixtures, kitchen faucets and other such things as these make the house look nice but won’t cost you much.
Timing is crucial as a property lying unsold costs money. So, before you buy a property, you need to be ready with a marketing plan to sell the property. You also need to consider whether you will list it yourself or use a real estate agent.
Overall, flipping houses has the potential to make a lot of money, but it also comes with significant risks. Therefore, you need to be prepared for the possibility that a property that you have bought won’t sell right away. You will also need to make some tough decisions. It’s a stressful business, but money doesn’t exactly grow on trees. So, keep the tips mentioned above in mind when you start looking for a house to flip.