You can trust that flipping homes can bring you financial success, however, there is always a learning curve and results may vary by the effort you put into it. Nothing about purchasing and improving a home is simple. It’s easy to go off course with flipping and end up losing out on money when you were trying to create extra money. Let’s go over some steps to flipping houses so that you can put your best foot forward.
Learn Your Market
Wherever you are looking to purchase a home, either for yourself or for flipping, you should research and familiarize yourself with what the real estate market is like in that specific neighborhood. Additionally, if you plan on renting the home in that neighborhood, look into what others are paying for rent in that area. This will assist you with piecing together what you are looking for.
To understand what you are paying for with a home, you can figure out what your home is worth online. You’ll be able to compare this to the asking price, how it compares to other homes in your area, and the average amount of money or time you will have to spend on repairs. Contact a contractor or home advisor to assess improvements and give you an estimate.
There’s a common rule to follow when purchasing to flip. You should only pay up to 70% of the after repair value minus the cost of improvements. The ARV is how much the home is worth after you have made all the repairs. For example, if the ARV is $300,000, and 70% of $300,000 is $210,000. And say the home has about $50,000 worth of repairs. $210,000 – $50,000 = $160,000. That is the total you don’t want to be paying over.
Flipping a home on your own is a daunting task but you don’t need to be alone the whole time. You should assess what areas you are going to need assistance with. You’re not going to be able to do any of this well but on the cheap. Make sure you have a budget for paying a real estate lawyer, other real estate advisors, contractors, insurance agents, and assessors.
You will need the assistance of professionals to help you better understand what you need to be completed. Working with experts can provide you with first-hand experience. The more accurate of an estimate they give you, the better you can prepare. Once again, you should seek information on how the housing market works.
Since there is always fluctuation and you’re looking at resale value, you have to be able to predict a bit of what your near future looks like. Look for insight into what a fixer-upper looks like in your target neighborhood. Look at foreclosures and bank-owned property in these neighborhoods. Bring the best contractor for the job in to look at some of the properties. Keep in mind the physical, mental, and emotional price that comes along with the monetary price.
Although there are many methods to lead you there, in the end, you’ll ultimately be selling your renovated home. You’ll have to be considering all of the costs of refurbishments and upgrades on top of other expenses and closing costs. Your success will be based on how well you were able to orchestrate your project.
If you invest in planning, preparing, and educating yourself on the real estate trends. Work with a real estate agent the first time you try and learn as much as you can. Agents have access to services that you may not have immediate access to. Additionally, they can assist you with getting pre-approved for your loans. You risk losing money if you’re not able to put in the oversight required the first time around.
If you have completed your assignments properly, then you should be selling your property for a nice profit or at least renting at a profit. For those that enjoyed the experience, reaped the benefits, and earned a profit, you are all that more prepared for your next flip! As with most endeavors, the more time and energy you put into this, the more success you will see.