The average profit from house flipping in early 2021 was almost $64,000. While that’s a decrease from $71,000 in 2020, that’s still enough money to peak people’s curiosity.
While flipping a house can sound the same as buying and selling any other home, that’s not quite true. In fact, the process of house flipping is one that’s entirely its own, and it’s something that requires some preparation and a whole lot of research to accomplish.
Read on for a complete guide to house flipping.
1. Start With Research
Like we’ve already covered, the biggest thing to do before you even think about touring properties is to start conducting market research. To be successful, you have to know the market you’re entering. To know the market you’re entering, you have to know where to start searching for sources.
The easiest way to start is by hopping online to search the market in the area you’re looking to enter. You can easily learn where people want to live, what areas are up and coming, and even which ones to avoid. You can also look into market and housing trends to find the best area to flip a house in.
You should also familiarize yourself with the ranking system that real estate investors use to classify neighborhoods. It starts with Class A and moves to D, with A being the highest ranked, but also most expensive homes, and D being the cheapest, but the least desirable.
For your first flip, starting with Class B or C is the safest bet. You’re not spending a ton of money, but you’re also not worrying about all the risks and possible fixes that come with Class D.
2. Secure Financing
This is another step to take before you start looking at homes or think about making a purchase. If you can, purchasing the property in cash is the best route to take. It’s going to save you from debt and interest, meaning less money lost if demo and renovation timing runs longer than it’s supposed to.
3. Build Quality Partnerships
If you’re going to be diving into the house flipping industry, then it’s important to build and maintain quality partnerships with people in your industry — especially with contractors, investors, and agents you may potentially like to work with.
When you’re first starting out, it’s important to begin networking as soon as you possibly can. Connect with experienced businesses in your area that you feel can help you along your house flipping path, and foster partnerships that help you and your business grow.
For the best business relationships, you want to show the people you’re working with that you can help them make money and vice versa. Take any advice they offer you into account, but make sure you’re only working with people you trust fully.
If you feel like you can’t trust the people on your team, then it’s going to be difficult to work with them on a consistent basis.
4. Don’t Diss on an Agent
This might be the most important partnership you have on your side, and it’s important to not fully dismiss the idea of a real estate agent. Instead, think about all the things they can offer you — especially if you have no experience in the real estate industry.
Not only will they be able to help walk you through the entire process, but they’ll also be able to help you accomplish difficult things, like attempting to sell an inherited house.
They’ll have a good idea about the different laws in your area, including tax ones. They’ll be able to walk you through the opening and closing processes on the house you’re flipping and, best of all, they’ll have connections around town.
This means they’re likely to have recommendations when it comes to contractors, plumbers, electricians, painters, landscapers, and any other kind of workman that you might need to help you get the job done.
In some cases, home flippers actually go to school to become their own real estate agent. It can save a lot of time and money, but it’s best to work with someone if you’re just starting out.
5. Find a House to Flip
Finally, once you have financing secure and a team of solid businesses in your corner, it’s time to get a budget together and start searching for a house you want to flip.
Don’t be afraid to ask your agent for their opinion throughout the process, and also let them take the lead on a potential area to purchase a first home in.
6. Work Through the Process
Once you have a home, it’s time to start flipping. Your agent and contractors will be able to help you come up with a plan to renovate and overhaul the space you’ve purchased, and then it’s time to get the process started.
Remember, not every home flip is a walk in the park. There are likely to be surprises and pitfalls along the way, but with the right mindset and team helping you through it, it’ll feel like a cakewalk.
Keep This Guide to House Flipping on Hand
Now that we’ve gone over the basics of house flipping, it’s time to get yourself started. Keeping this guide to house flipping on hand is a great idea if you’re hesitant about which steps to take throughout the process.
Once you’ve gotten the process down pat, it’s a good idea to refresh yourself every so often. Not only will it ensure you never lose key details, but it’ll also help keep you fresh for any project you take on.
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