If you watch enough reality TV, house flipping seems easy enough. You buy a property, do a little work during a weekend, and it sells within a few weeks. It’s not quite as easy as the TV shows make it seem, but that’s not really a big surprise. Those who’ve failed at it wonder why others succeed. Those sellers know the eight secrets to successful house flipping and that makes all the difference.
1. Find Trusted Experts Before Buying
Flipping a house goes beyond a few cosmetic repairs. Even the most beautiful home is a lemon if the plumbing doesn’t work or the roof leaks. Odds are, you don’t understand every aspect of renovating a home. Admit where you’re not quite as knowledgeable and gather a list of trusted expert contacts. For instance, ask a plumber to come in a check things before you buy so you know beforehand if the home fits in your budget.
2. Pay In Cash
The idea is to buy, repair, and sell as quickly as possible. What if the home doesn’t sell as quickly as you’d planned? It happens to even the best home flippers, especially if the market suddenly changes. Paying in cash gives you time to sell the home without worrying about making loan payments before you’ve made a profit. Consider saving up before doing this, or find a partner willing to finance your endeavor.
3. Have A Backup Plan
Finding the right market is key to success, but you never know when the bottom will drop out before you’re ready to sell. You don’t have to lose money if the worst happens. Instead, have a backup plan ready. Many house flippers keep the property during the downturn and rent it out instead. While you’re not profiting immediately, you’re still receiving income you could put towards another property. When the person moves out, you’re free to try to sell the home again.
4. Buy Simple Fixer-Uppers
To make a decent profit, you can’t put too much money into flipping the home. The more you need to fix, the less money you make. Buyers are only willing to pay so much. To keep costs low and profits higher, try to only work with simpler fixer-uppers. Look for homes requiring basic cosmetic repairs. Large renovation projects or structural repairs are costly.
Ideally, the best homes to flip are those needing minimal work that makes the home seem brand new. For instance, painting a home, cleaning up the yard, refacing cabinets and pulling up carpet to expose the natural hardwood floors makes a home look drastically different. It doesn’t cost much, yet makes the home instantly more appealing to potential buyers.
5. Study The Real Estate Market
It might seem like a no-brainer, but many aspiring house flippers know very little about real estate or how to judge the market. You have to know how to pick the right area and property to appeal to the most buyers. You also have to have some idea of when the right time to buy and sell is to make the most profit. Many successful flippers are ex-real estate agents.
Consider taking classes and joining a local or online group focused on home flipping. Find a mentor and talk to other investors. You’ll learn insider tips and keep up to date on the latest market news. Plus, you’ll have others around to look over any deals to make sure you’re not making common mistakes. Wait to buy your first home until you’ve had time to learn more about real estate.
6. Pay Close Attention To Your Budget
Budgeting is one of the biggest pitfalls for anyone new to flipping a house. Many only consider the initial investment in their budget. If they have $40,000, they don’t think they’re over budget if they spend $40,000. The problem is they don’t consider the cost of renovations. These could easily add another $10,000 or more. Anything not included in your budget is money out of your profits.
Examine a home carefully before buying and factor in any renovation costs. If it doesn’t fit within your budget, look for another home. Finding the right home saves you both time and money in the end. It may take time to begin with, but spending the time could help you come out in the black instead of the red.
7. Know How To Market
Some sellers are great at prepping a home, but they’re horrible at marketing. Unless you market the home, you can’t find potential buyers. You could work with local real estate agents, or you could do it yourself. The former eats into your profits but gives you access to a knowledgeable marketer. This could help you sell the house faster and get to work on your next house.
The latter equals more profit, but you will have to study the best ways to market real estate. It requires building contacts, advertising the property, showing to potential buyers, and handling all the final paperwork. If you know what you’re doing, you could sell the home quicker. You could also work with a real estate agent and still market the home yourself to spend things up even more.
8. Buy Low, Sell Low
Your initial instinct may be to buy low and sell high. The first part is a given. Try to find homes in good markets selling well below market value. Consider going to auctions or partnering with real estate agents to find people trying to sell their homes quickly. The less you pay upfront, the more profit you stand to make.
Experienced flippers know one of the biggest secrets to house flipping success is selling low. You may want to earn at least $50,000 per home. The higher your profit, the harder it becomes to find a buyer. If you drop your profit margin slightly, you sell more homes. For instance, you may only sell two homes at $50,000 in a year. If you dropped your profit to $30,000, you might sell four instead of two. This is an additional profit of $20,000.
House Flipping Takes Patience
Flipping a house isn’t an exact science. It takes careful analysis and a certain amount of risk. By knowing the secrets to successful house flipping, it’s a little easier to prepare yourself and profit from your first home. With patience and hard work, it is possible to successfully flip homes for a living.