So you want to be a house flipper, eh? You’ve seen those reality shows where people buy rundown homes, put in a few months of hard work, and then sell the property for a huge profit. And it looks so easy! All you need is a little elbow grease and you could be raking in six figures a year, right?
Wrong. Flipping houses is not as simple as it seems on TV. If done correctly, however, it can be a very profitable venture. Here are a few things you need to know before you start flipping houses for profit.
Location, Location, Location
They say location is everything in real estate for a reason. The location of the property you’re looking to flip will play a big role in how much profit you ultimately make. Obviously, properties located in nicer neighborhoods will sell for more than properties located in less desirable areas. But you also need to consider things like the surrounding schools, public transportation options, and crime rates when choosing a property to flip. The bottom line is this: do your homework before making an offer on a potential flip.
You’re Going to Need Some Cash
Contrary to what you see on TV, most banks are not eager to lend money to first-time house flippers. That means if you’re going to get into this business, you’re going to need some serious cash on hand. How much cash you’ll need depends on a number of factors, including the purchase price of the property and the estimated cost of repairs.
No matter how much money you have available, though, there’s one rule you should always follow when flipping houses: never spend more than 80% of the after-repair-value (ARV) of the property on the purchase price and renovations combined. So if a property has an ARV of $200,000, you should never spend more than $160,000 on the purchase and repairs combined. This leaves you with a built-in buffer that will help ensure you turn a profit even if unexpected repairs come up or the market takes a downturn.
Get Help from Professionals
Most successful house flippers hire professional contractors to handle the bulk of the work involved in fixing up a property. Not only does this free up your time so that you can focus on other aspects of the business (like marketing the property), but it also helps ensure that all necessary repairs are made correctly and in accordance with local building codes. Of course, hiring professionals doesn’t come cheap—which is why it’s so important to make sure you stick to your renovation budget (see above). If possible, try to partner with experienced investors who can help guide you through the process and introduce you to quality contractors in your area. This can be invaluable for first-time flippers who are still learning the ropes.
House flipping can be a very lucrative business—but it’s not without its risks. Before diving into this venture headfirst, take some time to learn about common mistakes newbies make and how to avoid them. With careful planning and execution, anyone has the potential to make serious profits flipping houses—regardless of experience level!
If you want to get started flipping houses, I have a step-by-step guide for you. Just click here to learn more! In the meantime, start thinking about what areas in your town have potential for flipped homes. Once you know where to look, all you need is some financing and the drive to succeed. Are you ready to make some serious cash flipping houses?
