There’s no doubt the concept of flipping houses has gained popularity in recent years. Flipping is the concept of purchasing a home and quickly renovating it to make a quick profit. It’s a risky way to invest your money but can lead to big money if you play your cards right. The question is: how do you know it will payoff?
Here are some things to consider before attempting a flip –
Do you have the money?
Having access to cash is a huge factor when deciding whether or not to flip. Even if the potential to make money is huge, money has to be spent to achieve that goal. Not only do you have to purchase the home either as a cash offer or through a conventional loan, but a hefty amount of money has to be put into a home as well. Flippers spend at least $20k on average per flip.
While some flips can be completed in a month, others can take a few months before they’re market ready so be sure you can afford the carrying costs (Mortgage, utilities, insurance, etc.) during that time. If you are purchasing the home through a loan, it’s important to already have a lender in place with a loan that has interest rates and down payments you can actually afford.
Remember when analyzing “flipped” houses data, the gross profit recorded doesn’t necessarily include the money put into the house for renovations. As a flipper you need to make sure you know the number you will be able to list the house for, as well as have solid estimate on how much the renovations will cost including permits and contingencies. Having a realistic budget is key in making your flip successful.
Do you have the time?
Anyone who has ever undergone any type of home renovation knows that even some of the simplest projects can end up taking a lot of time. Even if you aren’t taking on the projects yourself and simply plan on delegating each task to contractors, know that flipping a home will be a huge responsibility and will take up much of your free time. It’s important your schedule allows for it. Along with planning for contingencies in your budget, plan for contingencies in your timeline as well.
Do you have the skills?
Many times contractors, plumbers and electricians will take on flips because they are already skilled laborers and know the ins and outs of home renovations. This can also put them ahead of the game because of the contacts they may have in the business. Even if you consider yourself handy, it’s best to have some quality contractors lined up that you can trust and can steer you in the right direction if need be.
Do you have the knowledge?
One of the major factors in successful flipping is knowledge of the market and also knowledge of the neighborhood where you’d like to purchase a flip. This is where it’s important to have an informed realtor on your side, helping you find the perfect fit to help you reach your home investment goals.
In home flipping you need to make sure you get the house at the right price in order to sell it at the right price that will give you a profit. Flippers often use the trick of determining the market value (what you plan to sell it for), taking 70% of that number, then subtracting $30k-$40k in renovation costs to determine your max offer on a potential flip house. Having a quality realtor assist you in determining these numbers is key.
Last: research, research, research. There are so many factors that contribute to a successful flip – research each and every single one. Contact one of our realtors today to help you find the perfect house to flip.
Special Offer! We have an investors packet just for our flip homes. What a copy? Call/text 360.529.0992 or email us today!