It isn’t surprising that you’re considering getting into the real estate game. It has been considered one of the best ways to grow your money for a long time. The problem is, getting into house flipping isn’t the easiest way to get started.
If you’re ready to learn how to start a house flipping business, look no further. Follow the seven steps below to get your new business up and running.
1. Create a Business Plan
It’s hard to start any business without a solid business plan. Getting into house flipping is no different.
Take some time to put together a plan of action. It should detail both your goals and how you will achieve them.
Your business plan is also necessary if you want to look for external funding. Lenders will want to know that you have a plan to make money. It’s too risky to give money to someone that doesn’t know what they’re doing.
2. Form a Company
The last thing you want to do is mix your personal and business affairs. Creating a business will help you separate things.
Starting a business doesn’t have to be complicated. You can start with an LLC. An LLC is a pass-through entity that puts a layer of protection between you and your business.
Once you have your business formed, you need to open a bank account for it. Doing this will allow you to separate your business and personal finances. You won’t need to spend any time proving your business expenses during tax time with a business account.
3. Find the Right Market
You don’t want to look for a house to flip just anywhere. You need to search for properties that are below market value. If you buy from a prime location, the chances are that you’re only going to lose money.
It’s smarter to look for properties in up and coming areas. These locations are more likely to rise in value in a short amount of time.
You’re more likely to get a better return on your money when investing in these areas.
Of course, that doesn’t put established markets out of the picture. If you decide to buy in these areas, your selection is going to be less. You’ll be limited to the lowest value properties on the market.
4. Get Funding
You probably don’t want to go into a business like real estate spending your own money. There are plenty of people willing to partner with you if you can prove that you can make your money.
Look at the lenders in your area to see if anybody is willing to take a chance on you. The first place to look for funding is mortgage companies. Use them to help fund the initial purchase of your flips.
A hard money lender is another option. Some hard money lenders specialize in lending to flippers. Working with one of these lenders will give you access to capital and expertise.
Another option is to look for a business partner. If you have the skills to handle the flip, you can find someone willing to fund your business. A partner can give you easier access to cash and bring someone to the team who can help get work done.
5. Find the Right Team
The chances are that you can’t do a home renovation on your own. You need a team you can trust if you want to get the job done right.
The first place to start is a home inspector. You need to know everything you can about a home before you buy it. Finding a reliable inspector will help you understand precisely what you are buying, so you can get a more accurate estimate of how much money you need to spend on repairs.
The next thing you need to look for is contractors. These are the people who will be doing the work on your flips. There are a lot of bad contractors out there, so you need to spend time to make sure you find companies that can do the jobs you ask of them.
6. Connect With Other Real Estate Professionals
Yes, you’re going to be competing with other real estate professionals when you get into flipping. However, that doesn’t mean you can’t be on friendly terms with everyone.
Try to get involved with the local real estate community in the areas you purchase flips. These people will likely welcome you to their community.
Doing this means you can get insight into the areas you buy from. Other real estate agents can help point you in the right direction for deals. In some cases, you might find someone to partner with.
It’s also smart to look for a mentor. Working with a mentor can help you gain insight into the real estate industry that would take you years to learn on your own.
7. Learn the Right Renovations to Make
You don’t want to spend a ton of money with your flips. When you do this, you eat up your entire profit margin.
Instead, focus on the highest value improvements you can. Research the highest value interior design projects you can do that will increase the amount you can sell your home for. You never want to lose money on improvements.
Ideally, your renovations should add more value to the home than you spend. Say you spend $10,000 on improvements. For these improvements to be worth it, you would want to add $20,000 to the selling price.
Now You Know How to Start a House Flipping Business
You have a lot of work ahead of you if you want to start a new business. However, now that you know how to start a house flipping business, you can get started the right way. Follow the steps above to make your first flip a success.
If you want to learn more about what to look for in a home, head back to our website. Our latest posts have everything you need to know about finding a great flip.