If you’re a fan of Fixer Upper, or Flip or Flop, or any of the other rehab shows on HGTV, you might think that flipping a house and pocketing the profits is easy. The only way to make sure it is that easy is to be informed and prepared. Without the right mix of know-how and business sense, you might be in for some big mistakes. There are a few things to consider when jumping in.
Location, Location, Location
We’ve all heard it. After all, it’s the number one rule in real estate. Location, location, location. Rather than just knowing an area is HOT through word of mouth or through the grapevine, you should research any areas or markets that you’re considering. This is a great way to figure out what your competition is doing or what the market is really like. This type of research includes figuring out what investors might be acquiring properties for, and then of course, what they’re selling them for after renovation.
If you want to find a great property and make a profit, you can check out Zillow, Realtor.com, Trulia and many others. You might consider hiring an investor friendly real estate agent who has access to a multiple listing service or knows about properties that are coming soon, or are even off-market. The key is to get the best deal you can up front, in a great location, so you make the most profit once the project is complete.
If you’re looking at properties to flip, you should consider many different forms of financing and know what your budget is. You don’t want to get into a project and run out of money before it’s complete. Traditional loans, hard money loans and even using cash are some of the many ways to purchase and rehab homes for profit. In many cases, a hard money loan is often quicker and designed for real estate investing. Check out this post for more information on hard money loans. (link to post)
There are many different components to flipping houses. From the initial purchase price to the renovation costs, things can add up quickly. You will likely need contractors, materials, permits and much more to get your project started and completed. Researching the costs of major renovations like a new kitchen, foundation repair, a new roof, HVAC systems and more, is an important process that should not be ignored.
Preparation and Finishing the Project
You’ve done it! You found an awesome property, in a great location for a great price. You’ve even financed it and are ready to get to work!
This is usually when the hard work really starts. It’s important to take a step back and remember that you’re likely renovating this property to sell, not to keep for yourself. It’s best to look at the big picture and consider the neighborhood, the costs associated with this particular property and then the price you think you can sell for. You want to maximize your profits by renovating the property in a way that will get it sold quickly and will represent a great property for any buyer who looks at it. Something you will often hear when flipping houses is that you don’t want to over-improve the property. You don’t want to end up with the most expensive house in the neighborhood that just isn’t selling. You want to keep the renovations in line with what is happening in the neighborhood and maximize your profit at the completion of the project.
While it’s true that flipping a house can be very rewarding and profitable, it’s important to consider the many different aspects of the entire process, so you can pocket the proceeds and continue investing in other real estate projects.
Easy Street can customize a loan specifically to meet your individual needs. Whether it’s flipping a property or building from the ground up, we want to fund your next project. Contact us today!