House flipping is all the rage in the real estate industry. In fact, it is such a popular trend that there are even dozens of television shows dedicated to flipping. When done correctly, flipping houses turns into quite a lucrative business and some people actually turn flipping into their full-time careers.
If you are thinking about getting into the house flipping business, there are some things that you should know before you head out, buy a property, and begin your renovation. There may be a lot to gain, but there can also be a lot to lose if you don’t know what you are doing. Here are some important things to consider before getting involved in a flip.
Buy Wisely
The entire point of flipping a house is to make money. In theory, it seems quite simple – buy a house for a great purchase price that doesn’t require extensive repairs, and then turn around and sell it, earning a high profit. However, it often doesn’t turn out exactly like that. Know your budget before beginning the search for your house to avoid getting in over your head. Although you may have big dreams to completely renovate a kitchen, if it’s not in your budget, it won’t be profitable for you in the end.
Consider the Area
In the world of real estate, you always hear people talking about the three most important “L’s” – hint, they all involve location. This is because location really is that important. While you can change the way a home looks, you can’t change the location, which is sometimes one of the biggest things potential home buyers take into consideration
Avoid buying a house that is in a bad neighborhood or in an unattractive area (near train tracks or a junkyard, for example) because no matter how amazing you make it look, it will likely make for a very hard sell.
Get an Inspection
Don’t buy a house without having an inspection done. While the house may look like it only needs some updating, there could actually be several problems that you aren’t aware of. Structural damage, plumbing and electrical issues, mold, and other issues may be lurking unseen within the house, ending up costing an arm and a leg to repair.
Hire Professionals
While yes, you may be able to do some of the work yourself, don’t think that doing all of the work on your own will save you a bundle of money. Unless you are a skilled and experienced contractor and know how to correctly handle all aspects of the flip, employing professionals as needed is a wise investment that will save you money in the end.
Know your limits – sure, attempting to do electrical work might seem like something you’d like to try, but when it comes to your house flip, this probably isn’t the greatest place to hone your skills.
List Wisely
Once the work is all done, it’s time to put the house up for sale. Don’t attach a huge price tag to it, simply because of the amount of work you did to the house. Take a look at comparable properties in the area and list it about 1 to 2 percent lower than what they are listed for. By staying lower than neighboring houses, the appeal of your home instantly goes up for potential buyers. What does this mean for you? A higher profit.
Assess Risks vs Benefits
Flipping a house is a very lucrative business, but it can also be a risky one. Before you invest time and money into a property and the renovations that will be necessary, make sure you assess the risks vs the benefits. Will the flip pay off? Do you think you will be able to complete the job in a timely manner? Will the house sell? If there are more benefits than risks, you stand to make a good deal of money. However, if the risks outweigh the benefits, there’s a chance you could lose a tremendous amount of time, money, and energy.
Flipping a house is a creative outlet that also serves as a way to make money if done the right way. Before jumping headfirst into the renovation project of the century, keep this information in mind – you’ll end up making wise investments and, ideally, reaping a profit.
Naomi Shaw is a freelance writer in Southern California. She enjoys doing home renovation projects and finds these tips are very helpful when it comes to flipping a house.
