Anyone who has watched HGTV knows flipping houses is a great way of making money. But there are risks involved as well. To succeed you need a good eye for location and the ability to determine what the most cost-effective renovations are. In the previous year, the average gross profit house flippers made was around $65,000 making an almost 45 percent return on investment. So, real estate can be a great investment opportunity if done right. However, many people go into it without thinking it through. They are then surprised by the amount of work involved. In order to maximize your returns, it is important to buy in the right location while not spending too much on renovations. This budget-friendly guide to flipping a house will help you find your footing in the ever-evolving real estate market.
Location, location, location
One of the basic house flipping tips for beginners is determining what location will be able to give them the biggest return on investment (ROI). Even if you plan and budget the entire thing perfectly, not buying in the right area can end up costing you a lot. According to research, certain states in the US provide better opportunities for house flippers. For example, certain areas of Pennsylvania can actually offer you a gross profit as high as 100 percent. However, if these are out of your scope, you can still find fine opportunities in your own area. One of the ways to do this is to get advice from a real estate agent. They will be able to help you figure out where you should look first.
Location, location, location isn’t a saying just because it’s fun to say – there is serious merit to consider when talking about where a piece of property is. Other location-related things to pay attention to when flipping houses for profit are the income level in the neighborhood, the quality of schooling, as well as the crime rate. You should look for high employment and low crime numbers. Those are the areas with the biggest potential for making a successful flip.
Planning and financing
Planning and budgeting is the key to successful house flipping. When it comes to budgeting, you want to be very thorough. It is very important to account for any and all possible house flipping costs. You want to think of every scenario. In order to do this, determine what repairs will have to be made and what your labor and selling costs will be. You also want to ensure you set aside a portion for interest and carrying costs. These will increase the longer it takes to complete the renovations and finalize the sale.
Another thing you want to do at this point is to calculate the value of the house. Once you find a property that looks promising, you want to have a house inspection that will help you determine the ARV. ARV stands for ‘after repair value’. It is the number you get once you add up the current value of the property and the value of the renovations.
Once they have this number, many flippers then use the 70 percent rule to determine whether or not the property has flipping potential. According to the rule, you will make a profit if you buy the house for 70 percent of ARV, minus the money you are going to spend on repairs. There are different options when it comes to financing the house flipping costs. This will, of course, depend on your individual preferences and finances. Whatever the case, knowing how to flip a house requires a lot of planning and thorough research, especially when it comes to money.
Home inspection and renovations
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tting a proper house inspection is possibly the main part of any budget-friendly guide to flipping a house. Getting someone reliable to do the inspection before you decide to buy the house can save you from a lot of headaches. You do not want to purchase a property where any major repairs will have to be made. These will put too much of a strain on the returns on your investment. Some of the problems to look out for are foundation problems, different structural issues or issues with electrical wiring. Another expensive renovation item would also include any major roof repairs or replacements. Steer clear from all of these.
Let’s say the home inspection is promising and you decide to purchase the property. The next thing you need to do is find the right construction services to fit your budget. You’ll be able to do certain things yourself in an effort to save money. Painting, for example, is something you can probably do yourself and it will save you quite a bit of cash. However, most repairs will require the help of professionals. Any electrical or plumbing work is best left to those with the right skillset. Plus, even if you can do it yourself it may take longer and remember the interest expense clock is ticking. The most important of the house flipping tips for beginners is to find people who are reliable. Another important tip is to be able to settle on a realistic time frame so you do not waste any time.
Staging the house for viewing
When you are flipping houses for profit, you can list your property as soon as the renovations are done. However, when potential buyers come to a viewing, you want to make them feel at home and able to see themselves living in that space. They might find it difficult to completely project themselves into bare rooms, so you want to do some light decorating before you invite anyone in. If you are planning to continue making a living by flipping properties, it might be a good idea to get a storage unit for all of the furniture you like to showcase in your property. There is one thing you should be careful about, though – mold in storage is a common problem. This is why you should be very careful when packing up those items. Make sure they are always clean and dry before putting them away.
Avoid going overboard
This budget-friendly guide to flipping a house wouldn’t fulfil its promise if it didn’t warn you not to invest too much of yourself into flipping a home. This is particularly true when it comes to renovations and remodeling. Never forget that your main aim is to make a profit here by quickly selling the home. Many house flippers, especially if they are beginners, fall prey to the temptation of renovating the home according to their own tastes. This can often lead to unnecessary costs and lowering your ROI. Try to keep an emotional distance from your properties for your own sake.
You might also like:
- Which is Better: New Construction or a Pre-Owned Home?
- Your Simple Guide to Buying a House in 2020
- Tips to Quickly and Affordably Sell Your Home
- Tips to Afford a Home and Yard for a Small Family
