House flipping can be profitable when done right. It takes more than finding the right house, making it beautiful and selling it, though. There are many more working pieces that if you aren’t aware of or ignore, can make your investment less than profitable – you could even lose money if you aren’t careful.
We’ve uncovered the top 8 house flipping tips that promise to make your venture a fun, and more importantly, profitable one and we share them below.
1. Know the Neighborhood
Even though you’re flipping a house, not a neighborhood, it plays a key role in your investment. If you find a cheap house in a rundown area where no one wants to live, it doesn’t matter how beautiful you make the house – it won’t sell. Do your research and measure the area’s desirability and how often new homebuyers come through before you buy a home to flip. If there’s no buyer’s market, don’t buy it.
2. Don’t Fix the Cosmetics
Okay, you can make some cosmetic repairs, but don’t go overboard. Cosmetics are a personal preference. Focus on structural and functional repairs. Buyers want a home that’s safe, sound, and sanitary. They can handle the cosmetic changes. In fact, they’ll likely undo any cosmetic changes you made to make them fit their preferences, so it’s a waste of money to fix up the appearance too much only to have them changed.
3. Create Curb Appeal
Once you fix the home’s interior, making it functional and supportive, come outdoors. Remember, buyers see the home’s exterior first. If there’s no curb appeal, few people will be interested. They’ll pass you right up. At the very least, trim the landscaping, plant a few flowers, and remove any dead bushes or trees, giving the home an uplifting appearance.
4. Have A Contingency Fund
You know the saying ‘nothing is easy.’ That’s especially true with house flipping. While you can make a profit, there are often unforeseen circumstances going on behind the scenes that many don’t hear about. As you dig deeper into the home’s ‘issues’ you may uncover more problems that you didn’t put into the budget. Have at least 10 – 15% of the projected renovation costs on the side just in case this happens to you.
5. Hire Professionals
Yes, it costs more money, but time is money too. Even if you are handy and can do the renovations yourself, if you work full-time, there’s not enough time to get it done. The longer you sit on the home, the more money you lose. Carrying costs increase the longer you own the home and don’t sell it. Figure out what you can do in your free time, but save the ‘big renovations’ for the professionals.
6. Network With Other Professionals
If you plan to house flip for a living, get yourself a network of professionals. Real estate agents, contractors, and attorneys are all great to have in your arsenal. You never know when you’ll need one or the other and fast. Wouldn’t you rather work with professionals that you know and trust rather than scrambling to find someone when you’re in the middle of a crisis?
7. Create A List Of Buyers
Just as you need a list of professionals in your pocket, a list of buyers is important too. As a house flipper, networking is always a priority. The more people you know, the faster you’ll sell your inventory when you’re ready. Why start cold turkey every time you sell a home? With a strong network, you can sell your home faster and decrease your carrying costs.
8. Put Plan B In Your Pocket
Don’t assume the market will take off and you’ll make a huge profit. You might and you might not. Depending on how long the renovations take, the real estate market could take a turn for the worse in the blink of an eye. Then what? You need your Plan B so you know what to do.
There you have it – your tips to successful house flipping. Whether you’re flipping your first house or your 100th house, there are always things to learn and procedures to change. As the market (and trend) changes, so should your efforts. Today’s market may look a lot different than the market in six months. Stay abreast of the changes, put your best foot forward, and watch your profits soar. Remember you can use a hard money lender calculator to calculate the estimated net profit on your next real estate deal.