You’ve probably heard of the term house flipping before, but what exactly does it mean? House flipping is when real estate investors buy homes, usually at auction (but not always), fix them up, and then resell them at a profit down the road. The goal is to buy low and sell high, invest your own sweat equity to cut costs and earn a profit in a relatively short amount of time — usually within a couple of months. There are plenty of opportunities to make good money doing this, but there is also high risk associated with it if you don’t make smart decisions.
To get into the business of house flipping, you must have great credit. You can’t get into house flipping with poor credit. Unless you have enough cash to pay for a home and all necessary renovations, you’ll need some kind of loan. The higher your credit score, the better interest rate you’ll get on a home loan. This can save you thousands when you start house flipping, freeing up more of your money to invest in the house itself in order to make a bigger profit.
Not every house makes for a good flip opportunity. Just because a home is selling for a low price doesn’t mean you can put money in it and immediately make a profit. Successful flippers are very particular about the homes they choose to invest in. Here’s a brief overview of how the house flipping process works.
Process for Flipping a House
If you want to flip a house, you’ll first need to set a budget. When setting a budget, it’s important not to be conservative. It’s suggested that you multiply your current budget by five, especially if this is your first flip. Your current budget that you think is enough probably isn’t.
Next, you’ll want to find the right property. Your search will depend on your budget. Browse through foreclosures, auctions, and short sales to see which opportunities best match up with your budget and renovation ability.
When you’ve found a house you’re interested in, make an offer. With your financing in line and the right property to take on, you can make an offer. Offers will sometimes fall through, but that’s okay as you can have multiple properties in mind if your first choice doesn’t work out. Don’t hesitate to seek the guidance of a real estate agent who has experience working with house flippers.
After you’ve secured your property, you’ll want to set a timeline for your flip. Not every renovation requires the same amount of money, time, or effort to complete the flip. It’s important to take the time to set a reasonable timeline for yourself, but at the same time, know that the longer it takes you to complete the flip, the more money you’re losing out on.
Next, you’ll want to actually do the work required to successfully complete your flip. What this entails is up to you and the condition the property is in. Some flips require less work than others. And sometimes a flip can end up being a complete overhaul of the home. This is where working with a licensed contractor is extremely beneficial as they can do the work for you.
Finally, it’s time to find a buyer. After you’ve made all the updates, it’s time to put your property up for sale. You could try to sell it yourself, but a licensed real estate agent can help you market the home to the right buyers and widen your reach. Keep in mind that your agent knows the market and the property’s potential profit, so they can be extremely valuable during the selling process, too.
What Kind of Work Can You Do During a House Flip?
When it comes to flipping a house, there is a range of things you can do. Much of what you decide to do depends on the condition of the house at the time of purchase. Some houses are in better condition than others and require less work prior to a resale. It’s important to know what updates and upgrades will best increase the value of your house and provide the greatest return on investment (ROI). Here are 4 Home Improvements That Add the Most Value to Your Home.
If you’re interested in doing a quick flip, and making a quick profit, but not necessarily the most profit, then you might focus on simple things like repainting the interior of the house, pulling the carpet throughout the house and either replacing it or simply staining the hardwood floors that are likely underneath, and updating cabinets, countertops, and sinks in the kitchen and bathrooms. A simple paint job can turn old, outdated cabinets into fresh, new-looking cabinets for a very small price.
An easy way to make updates to your house without spending a lot is to improve the curb appeal. Easy ways to do this are by trimming your shrubs, pressure washing your decks, sidewalks, and driveway, adding color to the front door or even replacing it, upgrading your porch light, and painting the exterior of your house, just to name a few.
What Can Go Wrong During a House Flip?
There are plenty of things that can go wrong during a house flip and mistakes or issues can get very costly. Popular TV shows make house flipping look easy, but that’s far from reality if you don’t have the proper knowledge, as well as an experienced team alongside you, which is why we stress that you don’t do a house flip alone unless you have previous experience doing so. Even if you do, it can be a big benefit to have a team alongside you making sure things are done right.
When flipping a house, you have to expect the unexpected. This includes bad weather, unforeseen delays and expenses that weren’t budgeted out, and even certain government regulations that you may not have known about or expected to cause a problem.
Weather conditions can delay a house flip for days if not weeks, depending on how poor the weather is. It’s always good to throw some extra days into your timeline to account for weather delays.
Why Working with a Licensed Contractor Will Benefit You in the Long Run
Taking on a house flip by yourself could seem appealing, but we recommend working with a licensed contractor to ensure that the work is done right and done without any mistakes. Our team of experts is able to handle a project with much more ease than you could by trying to do it yourself. It’s easy to run into the risk of injuring yourself, constructing something incorrectly, or simply not having the required knowledge to complete a project.
By working with a licensed contractor, you’re able to avoid making too many mortgage payments and can resell the house much faster and for the most profit because the real estate market is hot right now and houses are selling fast. By advertising the house as having been flipped by credible contractors, you’re also making future buyers comfortable knowing they’re buying a home that was upgraded by professionals.
If you’re interested in flipping additional houses in the future, developing a relationship with a licensed contractor is important because you can work together on future projects and build chemistry.
Remember This Before Diving Into Your House Flip Alone
Before you jump right into a house flip, you should know where to find a team of experienced designers and contractors that can help make your house flip much simpler for you.
Our team can provide you with the direction, vision, and execution you need when you decide you want to flip a house. Let our team be the ones to give your home the right look and feel. At Malek Construction, our team works hard to make you feel right at home. Contact us today, and we’ll help you build the home of your dreams.