Beginners Guide to Flipping Houses
With foreclosed homes flooding the market, flipping homes that have been left empty for years is becoming a big business in the real estate world. There are those getting into the “flipping” business who look at it as a way to make a quick buck or two. The reputation of those who cut corners or do shoddy work suffers, which means the house sits on the market for longer periods of time, and opens them up for possible lawsuits. Producing quality results and attention to detail is important to keeping this aspect of real estate profitable.
1) Do what needs to be done. Every home, unless the buyer is paying cash requires an inspection. Have an inspection done prior to purchasing the property and know what has to be done for the house to sell. Don’t cut corners and create situations that will put the family that purchases the renovated home at risk, because ultimately, the renovator and the realtor selling the home will be held responsible for any false claims or defects purposefully hidden.
2) Avoid spending money that doesn’t need to be spent. Consider other homes in the neighborhood. A pool would be a great addition to the property, but has no added value to the home. If the cabinetry in a kitchen is outdated, it might be worth the extra money spent to replace them as kitchens and bathrooms have the best return on the investment.
3) Don’t “fix” things that aren’t broken. If the carpet, tile, laminate, wood flooring is in good condition, why spend extra money replacing it when a good cleaning is all it needs.
4) Always work within a budget. Most people set a budget when planning to flip houses but very few manage to work within that budget. This is the difference in making the profits anticipated versus taking a loss.
5) Renovate with the intended customer in mind. What might go in the home of the person flipping the investment property will often be more expensive or not be in the same taste of the potential buyer. Prior to beginning the renovation, look at new homes in the same price range of the one being flipped and the ones in the market area. Create a home that will be able to compete with these homes and provide the largest profit margin.
6) Time is money. Remember this in all things. The more time it takes to do the flip the more money it’s going to cost and the less money that will be made. Plan small changes that have a big impact and can be done quickly to get the most out of the flip. This may include hiring someone to do the work.
7) Never attempt a champagne flip unless you have a champagne budget to back it up. Certain price points sell better than others. Do the research and match it to the budget that has been set. Just as flipping above the market is an unwise move it is equally unwise to flip a property beneath the target market as well. Do not attempt to flip a house in an upscale neighborhood if the cost of the upscale building supplies and appliances that will be needed in order to make it a success doesn’t fit the investor’s budget.
While these aren’t guarantees for success they are solid advice that will minimize the risks faced when flipping properties.