With the HGTV shows about flipping houses, it might seem like a tempting idea. Who doesn’t want to find a diamond in the rough and make it shine? However, flipping properties isn’t as easy as the TV shows make it look!
Property flipping is a lot of work, and it will require careful planning, a lot of determination, and a lot of time. You’ll also need some startup cash (you never see that part on television, huh?).
If you’re still intent on getting started, we admire your persistence. We’ll show you the ropes so you can get started flipping property and making a pretty penny.
Keep reading for a brief beginner’s guide toward flipping properties and making it profitable.
Plan Ahead and Consider the Market
Some people just go jumping into property flipping without doing the proper research. They see a foreclosed house or dilapidated building and think that they’re fully capable of doing the job with no planning required.
This is a foolish mistake, and it’s one that you’ll pay for when it’s time to sell the property (if you manage to sell it at all). Some people get lucky and go in blind and still end up making a profit, but you can’t count on luck for what preparation is supposed to achieve.
Think about what you want to achieve with this property flip. What tools do you need? What do you want the end result to look like? You also need to consider the housing or property market and how it compares to what you’re trying to complete.
How Do You Work With the Housing Market?
You might be in an area where the housing market isn’t doing as well as it could be. This means that you’ll find more success if you go elsewhere for your property flipping.
You can check out local and distant housing markets online and make your decision there.
Buying a very underpriced home in a less-than-stellar market can still get you a decent return on your investment with a lower risk, but finding a slightly more expensive home in a hot market might get you more profit (though under riskier conditions).
Before going all in, investigate the buying and selling patterns to see if the purchase (and subsequent flip) is worth it.
Also, be aware of any potential reasons that the properties market will crash. This is often an unpredictable real estate situation, but do your best to do your due diligence before you get started.
Create a Budget
Any construction or renovation work is going to require a budget of some sort so that money can be allocated to the correct projects.
If you don’t budget correctly, you can end up wasting all of your money on repairs and none on renovations that will make the house look more appealing. When you’re trying to sell, your house doesn’t just have to be functional. It has to be pretty and have curb appeal.
This money is all “risk money.” You need to know that there’s a possibility that you will not see this money again, and rather, this is going to be a money-sink.
With that in mind, consider how much money you’re going to give for the purchase of the home, repairs, upgrades and “beautification,” the sale, and “extra.”
The extra money is money that you can use in a pinch if you go over-budget in another area. The only time you should remove money from another section’s budget is if that work is complete.
Be Realistic and Make Sure You Can Afford This Venture
This isn’t going to be cheap. Even if you find the cheapest, most dilapidated building on the market, it’s probably cheap for a reason. The cheaper the building, the more money will need to go into repairs.
Keep this in mind when you’re shopping. Some repairs are more costly than others and some may eat up your entire repair budget just for one section of the house.
Mold, for example, can be difficult to fix. It may permeate the structure of the house. This is also true with burn damage. These home problems need to be fixed regardless of your budget before trying to resell the property.
A more straightforward optional home improvement choice would be adding concrete flooring. It’s a stylish new trend that can add a lot of unique value to your property. Learn more about concrete floors for your house at https://policrete.com.au/.
Go to the property first to see if you’re actually going to be able to afford the work that it’s going to take to get the house back up to snuff.
If you don’t have the money upfront (tip: you can’t flip properties with no money), finding a hard money lender to help you out while you do your work can be helpful. As long as your investment property is as profitable as you imagine that it will be, you should have no problem paying back the loan.
Consider the Risks
As we’ve mentioned, this is a risky process. Flipping a house looks easier than it is, and you have no guarantee of profit. If you don’t have the time and money to safely invest, consider waiting until you do.
The house could flop. Even the nicest of homes don’t always sell, especially in a poor market. You might have to end up selling below your ideal asking price, meaning that the return on the investment might be low or even nonexistent.
It’s also possible that the housing market could crash. We can’t predict what’s going to happen (as this year has shown us) and you may put yourself in an unfortunate position where the house is unsellable or a once-great market is now miserable.
You also might find problems in the house that can’t be fixed. How are you going to manage that? How much money do you have to remove entire sections of a home?
This is a gamble no matter how you cut it. The real estate world can get really risky!
Depending on your budget, you can only fix so much. You might have dreams of a terrible house being turned into a beautiful family home, but your wallet might not agree with this venture.
Repairs have to come first and you need to work on large issues that would make any house difficult to sell. Small repairs are generally a non-issue in most household sales if the house has enough going for it.
You also want good curb appeal and new appliances. People will be more willing to pay for a home that looks good and will run well for years to come. No one wants to replace a stove from the 70s a year after buying their home.
Know How to Sell (or Hire Someone Who Does)
Fixing the house is only half the battle. Selling the house is the second half, and it won’t be easy unless you’re in a hot market.
Some money should be spent on a real estate agent. They might be able to handle most of this process for you.
If you’re doing it alone, consider spending some money on staging. You’ll need to rent furniture to make the house seem “lived in”. If you have a big house, this could cost a lot of money. If you’re working on a bungalow, it’s a smaller investment.
People don’t only use the furniture to gauge what their home could look like, they also use it to figure out scale and whether or not the house is going to suit their needs.
You can ignore staging altogether if the house itself is pristine. Shiny and clean floors and countertops look great even if there’s no furniture to be seen. A fresh coat of paint can also make all of the difference.
Unless you’re a good photographer yourself, consider spending money on a professional real estate photographer. They know how to make the house look great, sometimes better than the house looks in person.
Houses and properties that look good online are easier to sell, so this is an important factor.
You’ll also need to up your marketing game when flipping properties for a profit. Learn how to write a great home bio, accentuate the awesome features of the house, and present it well across whatever home buying and selling platforms that you’re using.
If this sounds like too much work for you, just hire the real estate agent and save yourself the trouble.
Flipping Properties Profitably: You’ve Got This!
Flipping properties is harder than it looks, but it’s also a fun way to work with likeminded people and hopefully get a huge return on investment. Before jumping in, though, make sure that you do all of the prep work that this property flipping adventure is going to require.
Make sure that you have the funds, assess the risks, and know the market that you’re in. You’ll be all set to get started flipping houses properly and profitably. Visit the Real Estate section of our Bootstrap Business Blog to learn more about flipping properties for a profit!