Are you interested in getting into flipping houses but aren't sure where to start? While this can be a great way to make tons of cash, it does involve a lot of work. Make sure you're fit for the job by learning what this career path entails.
In this guide, we will go over how to get started flipping houses and how to be successful in the process. Keep reading for a beginner's guide to flipping houses so that you can figure out if this is the best fit for you.
Retain Market Research
Not every market is ideal for flipping houses, which is why it's important to research a range of different real estate markets. Consider your budget for a flip and look for a market you'll be able to work within. Start familiarizing yourself with market terminology and begin thinking like a real estate agent to make the best decision for your new investment.
For example, many real estate agents refer to neighborhoods in a class ranking from A to D. An A-class neighborhood will have the most expensive homes with wealthy markets and homeowners. A B-class neighborhood will likely be geared towards the middle class.
A C-class neighborhood is likely composed of blue-collar or working-class individuals, while a D-class area caters to the lowest income earners.
Many house flippers specialize in updating homes in the D-class area. However, these areas may come with their own risks, such as break-ins. Insurance premiums may be higher in these areas.
In these areas, you will likely be flipping for a landlord rather than a homeowner. This could lead to lower margins but could lead to a smoother sales process. An experienced landlord is likely well versed in real estate investment and will know what they are looking for, resulting in a no-fuss purchase and quick settlement.
For your first deal, consider targeting a class B or C area in order to play it safe.
Create a Business Plan
Real estate is a business, and if you want investors, you'll need a business plan. This plan should include a timeline, your budget, and the scope of the project.
When coming up with your budget, figure out how much you have to invest in the project. Be generous with your budget, leaving enough money for unexpected renovations along the way. Make sure you also consider the cosmetic updates that will need to be done, from kitchen or bathroom updates to new flooring, paint, or fixtures.
For your first house flipping deal, keep things simple by avoiding properties with structural issues. Avoiding mechanical problems that require you to pull permits will allow you to skip the additional hassles. Although this may narrow your margin, it will allow you to spend less time and money while cutting down on risks.
For best results, line up your financing before you need it. You want to make sure you have a lender who can fund your project before making a deal or offer.
When comparing bridge loan costs, make sure to focus on fees and interest loans.
Network With Contractors
Make sure you start networking with contractors before buying your first house to flip. You will want to start getting quotes before the property is under contract to help you create your business plan most accurately. It may be a good idea to get to know some low cost, well-rounded handymen as well.
Build a network of general contractors, as well as experts in certain niches like roofing, plumbing, and painting. Network with a great real estate agent and home inspector to help you sell your home after the flip. Unless you plan to do all the work yourself, building a strong network is essential to successful house flipping.
If you've never worked with a contractor before, ask them for past clients' testimonials or get contact information for references. References can let you in on how the contractor works with their clients, and whether or not they stand by their word when it comes to deadlines and pricing. It can also give you some insight into the quality of their work.
Stay Productive During Renovation
Once you've found a home to flip, you want to get to work right away. This is why it helps to get all of your business planning sorted before buying a home to flip. From the day you buy the home, you are paying interest costs, utilities, taxes, and additional expenses.
The faster you work on a property flipping project, the faster you can finish and sell it. This will allow you to start paying off your loan, leading you closer to pulling in profits.
Make sure that you and your team of contractors are practicing efficiency to get your renovations done as swiftly as possible. This is a key reason to make sure you're choosing your contractors effectively. You want to avoid contractors that may raise the price on a house flipping job halfway through construction.
Brief Guide How to Get Started Flipping Houses
Before you begin a new path, make sure you know everything you can about how to get started flipping houses for the best results. Find out all you can about this career path to make sure that you are fit for the job. If flipping homes sounds like a great path for you, make sure you're prepared by doing your research and planning in advance.
Are you looking to learn more about the current housing market and house flipping? Head to the real estate section of our site right now for additional insight on profiting from properties.
