If you watch enough TV you’re bound to come across a show or two about house flipping. In these shows you can watch an investor turn a rundown house into a dream home in just 30 minutes! While these shows tend to make it look pretty simple, the question is, what are the keys to sustained success in flipping houses? After all, having one successful flip, only to break-even on the next one isn’t going to work for the strategic real estate investor. We talked with a few of our more experienced and successful house flippers and came up with the 3 keys to consistent success in fix and flip investments.
Do Your Homework.
The single most important thing an investor can do is market research. You must know as much as you can about your market, sales comparables and the numbers involved. The basic formula for all house flippers is to buy below the market, rehab in a cost effective manner, and sell at, or above the market. However, each of those steps require knowledge. A potentially lucrative purchase can go sideways fast if some of the assumptions are incorrect.
Stay within a Budget.
Use your market research and realistic renovation plans to create and stick to a budget that meets your goals. It is also wise to have a contingency amount included in your budget. There will always be surprises that come up, and having a contingency for these will enable you to take some bumps and bruises and still come out with a nice return in the end.
Use Your Brain, not Your Heart.
We all know it’s easy to fall in love with the idea of house flipping. The “reality” TV shows make it look so easy. After all, taking a rundown home and giving it new life can be very rewarding. However, be sure not to confuse a flip project with the idea of creating your dream home. You want to create a house that will sell to a broad audience in your market, not customized to your personal tastes. This will often mean you will choose a different color of paint, fixture, or type of flooring than you would for your own home. Keep your eye on the end goal of providing an attractive and well-priced home for a large pool of potential buyers.
If you are able to follow these three keys you should be able to find sustained success in house flipping.