Within the past decade, flipping houses has become the newest craze. Buying a second home, renovating, and re-selling sounds like an easy way to make some extra cash. But, without the proper knowledge and tools, you may be taking an unprofitable gamble.
Here are 5 tips to make sure your potential biggest investment isn’t made in vain:
- Have enough money
Whether you’re purchasing your first home or dabbling into an investment property, real estate is an expensive venture. Before you dive in you will want to make sure you are financially secure. Once you have finances nailed down you should then reach out to your lender to see which mortgage options will work best for you.
If you have the luxury of paying cash this will eliminate interest, but there will still be those inevitable fees such as taxes and utilities. Be sure to factor in how much the renovations will cost. The worst thing you can do is try to go the cheap route when flipping a house. In order to make a profit, the sale price must exceed the amount you paid for the home and renovations put in.
- Have enough time
Unless you happen to be a Flip or Flop star, flipping houses is probably not your career. It can take weeks, even months to find and purchase the home you want. And once you’ve signed on the dotted line you still need time to renovate.
Make a checklist of things you need to do before selling, this list should especially include an inspection. This will make sure the home is up to building codes. After you’ve bought and renovated the home, it’s time to sell. During this time, you may be stuck with doing most of the leg work when it comes to showing the home to prospective buyers. This is a 100% time commitment but making at least a 10% profit will be a nice pay off.
- Skill is key
Unlike a professional builder or carpenter, you don’t flip houses as just a hobby so the task may come as more of a challenge. You will find that with flipping houses the real money comes from sweat equity. Sweat equity is a contribution made by the homeowner to renovate the home, without the help of a professional helping hand. If you can install a kitchen sink, you can flip a house. Paying a professional sounds like an easy way to avoid doing any dirty work but the profit from the home will be reduced by the amount paid to the professionals. Bummer!
- Be knowledgeable
If you are looking to have a successful house flipping experience, knowledge is power. Picking the right home, in the right neighborhood at an affordable price will make all the difference. Now is a great time to consult your lender or realtor for these questions. Both will be able to guide you through the process. Also, knowing which renovations will be the most profitable is important. Wasting your time on something with a low cost just because you are trying to save money will only lower the potential amount you may get during the selling time.
- Patience, patience, and more patience
Expert house flippers take their time finding the perfect property to take on. A more novice buyer will rush out and hire a contractor to help them with the tasks they don’t want to do themselves. Out of these two which one do you want to be? An expert, of course.
By working diligently, you will have plenty of time to purchase and renovate. Being time conscious will also save you money while maximizing the profit.
If you are ready to take on the task of flipping houses, that’s great. But, do your research. Much like anything in real estate, it is an extreme time and money commitment with the financial outcome based solely on how you go about the process. Act wisely.