Flipping houses is a popular way of gaining profits from real estate investments. A house flipper basically purchases an old, run down property, renovates it to perfection, and resells it at a profit. Although it may seem pretty simple, the procedure is much more demanding than one might think.
Unless you invest your time and effort in learning and mastering the basics of flipping houses successfully, you could very well end up with losses. But worry not, as we are here to help! In this article, we have explained how the process of flipping houses works and also provided the necessary information to get you started with the same.
How Does Flipping Houses Work?
If you are just starting out as a house flipper, you might wonder how flipping houses works? Well, it’s not as simple as buying a house, fixing it, and reselling. You first need to research the market to get an idea of when to buy a property and when to sell it to gain maximum benefits. Moreover, you also need to consider the area of the property. Buying a house in an area that’s rapidly developing is the best choice, as the property value is sure to increase by the time you are done with renovation.
In general, the properties you buy can be of two categories. The first includes properties that need quite a bit of repairing. While you might be able to get it at a competitive price, you do need to have some funds to conduct the renovation. But, there is a high chance of gaining a good amount of profit from such properties.
The second type includes properties that need fewer repairs. This is a suitable option for people with a limited budget who don’t want to spend too much time or money on renovation. In this case, you buy a property at a low price, and flip it to another buyer, often without any repair work. This is also known as micro-flipping. While this may not bring in huge profits, it’s a quick way of making money.
Proper Planning Is The Key To Successful House Flipping
If you are thinking of venturing into house flipping, it’s best to start with a plan. Below are a few steps that you can follow to ensure a high success rate as a house flipper.
Step 1 – Research The Market
Conducting market research can help you determine the areas that have a high potential for profit. Moreover, by researching the latest design trends in the market and incorporating them while renovating the house can easily fetch you great profit.
Step 2 – Set Your Budget
As a house flipper, you need to set a fixed budget. This amount should include not only the price of acquiring a property but also the costs involved in renovation, taxes, and other associated expenses. Before you set off to buy a property, you need to ensure you have acquired the necessary funds that would cover the whole process.
Step 3 – Find The Perfect Property
You need to look for a house that is within your budget and has the potential to fetch a good profit after all the repairs are done. Getting in touch with an experienced real estate agent is a good idea as they can help you locate the right property that matches with your requirements.
Step 4 – Plan A Schedule For The Repairs
Once you acquire the property, it’s time to determine the changes you wish to incorporate within the house, and also determine a time limit for completing those.
Step 5 – Redesign The House
It’s best to hire reputed contractors for renovating the house as they usually have an experienced team under them. Make sure that you clearly explain the changes you want and also set a realistic deadline for the tasks.
Step 6 – Put It Up For Sale
Once the property is renovated, it’s time to put it up for sale on the market. You can get in touch with local real estate agents to find potential buyers faster.
A Few Things To Keep In Mind
While house flipping can be a profitable business, a lot of it depends on proper planning and skills. Below are some common mistakes that new house flippers tend to make.
Underestimating The Amount Of Money Needed For The Project
You should refrain from investing in real estate unless you have the necessary funds. You see, you may find that the house needs more repairs than you initially thought, thus increasing your expenses. Therefore, make sure your finances are in order before starting as a house flipper.
Not Investing Enough Time
Flipping houses requires time. Right from researching the markets to searching for the right property and conducting repairs, the process is quite time-consuming. Moreover, you need to be there to supervise the whole process. So unless you have enough time, house flipping isn’t a good idea.
Lack Of Knowledge
To be successful as a house flipper, you need to have a deep knowledge about the real estate market. Once you have a sound idea of the market, it will be easier to pick the right property with the potential to bring in profits.
Some Tips To Get You Started
Now that you know how house flipping works, here are a few tips that would help you get started on your journey as a house flipper.
- Choose houses in more desirable areas – they have a high chance of selling for a profit
- Go for houses that are structurally sound as they would need fewer repairs
- Do your research before applying for a loan since the interest rates varies for different lenders
- Focus on building industry contacts – they may come in handy for the future
So, we hope we were able to address the question of how flipping houses works in this article. If you have the right skills and are willing to invest both time and money in this endeavor, house flipping can be quite profitable as a business.
If you are just starting out as a house flipper, it would be best to get in touch with experienced real estate agents or reputed companies like Auction Flippers to maximize your chances of profit.