Turn on your T.V. and you’re guaranteed to be inundated with numerous channels showing a house flipping venture; taking a run-down shack for pennies, turning it into a paradisiacal retreat, then selling it for a major profit.
Seems straightforward enough, right?
Unfortunately, the reality of this industry isn’t always so pretty. There’s a lot more blood, sweat, and tears that go on behind the scenes, and it’s important to consider the realities of this endeavor before jumping in. Here’s some essential advice for those of you considering a career in home flipping.
Do Your Research
If you want to be successful at the house flipping game, you’ll need to do your fair share of research before getting started. Network with like-minded individuals and learn about their successes and failures, talk with local real estate agents to get a handle on the local housing market, and determine which neighborhoods offer the right combination of affordability and desirability. Attend real estate seminars, and read any literature you can find on the subject.
It’s important to determine what type of returns you can realistically expect, and be well-versed on the tasks that await you with this venture. If you can find a mentor, someone who has made a successful go at house flipping endeavors, you’ll be better prepared to start your own venture.
Financing Your Venture
One of the first questions you should ask yourself is how you plan on affording your house flipping project. Real estate is a costly investment; while it often provides great returns, it requires a great deal of capital to get started.
If you don’t have a bevy of cash to work with, you’ll need to consider the lending options available. After the recession, banks and other traditional lenders tightened their reins on loan approvals; generally, banks will not approve loans for those looking to flip a house, unless you’ve showed previous experience and success in the industry and have an impeccable credit score.
If you’re looking for unique lending options, consider applying for a hard money loan or seeking crowdfunding support from friends, family, and charitable online strangers. If you’re planning on flipping a property, you need to be assured that your eventual list price after renovations will exceed the expenses related to purchasing the property, performing the renovations in question, and paying off the taxes.
Don’t forget that home sales aren’t always immediate; it could take months, even years, to sell off a property depending on the market and local interest.
Locating the Right Home
Inarguably one of the most important facets of the flipping process comes in the initial property acquisition. It’s important to find an affordable property that can realistically turn a lucrative profit. Many first-time home flippers employ the help of real estate agents, and this can be a wise strategy.
Certified agents generally have access to the MLS, or Multiple Listing Service, which lists all the available houses on the market in the United States. This can help you seek out foreclosures and find underpriced homes—ideal for flips.
This is a Job
This might seem glib, but many novice house flippers assume they can take on this endeavor as a hobby. This isn’t a venture that can be done in your spare time; to be successful, you’ll need to devote a significant portion of your time, and it often calls for full-time employment devotion.
While the beginnings of the process can be exciting, practice patience; rushing to purchase a home, neglecting to take time interviewing contractors, and selling to the first bidder can cost you big profits.
Selling the Property
When all is said and done and renovations are complete, it’s time to decide how to approach selling your property. Don’t fall into the trap of accepting the first offer you receive. Consider using the help of a real estate agent to list and promote your property—the investment is often worth the cost of their services.
In contrast, some flippers decide to turn their projects into consistent supplemental income by turning it into a rental business. If you do decide to go this route, always be sure to treat your rental property like a business.