Do you watch flipping shows on HGTV and wonder how you can get in on the action and flip a house for profit? Although it’s often not as easy as it appears on HGTV, flipping houses can be lucrative. Here are some things for you to consider when deciding whether to enter the world of real estate investment.
What Is House Flipping?
House flipping is a colloquial term real estate investors use to buy houses and sell them for profit. “Flip” refers to the investor’s intention of selling the home quickly. How quickly a flip home sells on many factors, including whether it requires any renovations or whether the investor is holding it until its value rises.
Is Flipping a House a Good Investment?
Flipping a house can be a lucrative investment. Done the correct way, you can sell a house for much more than you purchased it. However, the wrong property can put you thousands of dollars in the red.
Keep reading for five important tips to a successful flip.
Buy With Cash
Flipping houses is a risky business. Adding debt to the equation only makes the process more stressful. Purchasing a flip in cash means that you can avoid interest fees and reduce your overall costs. In addition, buying a house in cash means that you can wait out a slow market without sacrificing your asking price.
Know the Local Market
Understanding the market, you’re working in, and local real estate trends are crucial when flipping a home. You need to able to compare the property you’re purchasing to similar homes sold in the area. This will help you to ensure you’re not paying over the odds. In addition, you need to know how much you could potentially sell the home for when you’re ready to list.
If you’re not sure how to make your own property comparisons, you can ask a local real estate agent to help you determine whether a property is a good flip option or not. An experienced agent can help you refine your property search based on your budget and desired profit.
Create a Realistic Budget
When you flip a house, it’s crucial that you factor in all of your potential costs before you place an offer on a property. This includes considering your purchase price, completing repairs and renovation projects, and the costs associated with selling. Houses almost always have unexpected issues that crop up, so it’s essential to plan for this also.
A thorough home inspection can help you avoid any unpleasant surprises when purchasing a flip property. If you know what you’re getting into up front, you can prepare for the costs and not get caught off-guard,
One of the biggest mistakes many new investors make is over-improving their flip. Although hardwood floors and the latest on-trend finishes look beautiful, they become a burden if you can’t recoup the cost. It’s crucial that you only complete repairs and renovations that will add value to the home.
For example, if you purchase a flip for $150,000, it makes no sense to renovate it with marble countertops and a chef’s kitchen. In contrast, don’t purchase a home in a million-dollar neighborhood and scrimp on the finishes because your potential buyer pool won’t be impressed. It’s crucial that you know the local market, and don’t over or under renovate. Recouping your costs is the most important consideration as a real estate investor.
Put simply; flipping houses is a game of numbers. To make a profit, you really need to have a clear understanding of your budget and potential profit when you flip a house. Of course, things can always go awry, but you can substantially limit your risk with a strategic plan.