TV has glamourized the fine art of house flipping. Truthfully, it’s a hard job that carries many risks alongside lucrative profits. knowing what you’re getting into and properly preparing for house flipping is your best bet. This requires taking the time to network with people who have experience with house flipping as well as taking the time to learn as much as possible on your own. Fortunately, many tips will help you get started and guide your decisions to diminish the elimination of risk and profit loss as much as possible. 

What is House Flipping?

The best definition of house flipping is when an investor buys a house for a discounted price, makes improvements, and then turns around and sells it as quickly as possible. However, this explanation simplifies the meaning and leaves a lot out of what it takes to successfully flip a house. However, in general, this is both the process and the goal of investors who flip houses. There’s a specific focus on your budget spending and the amount of time it takes to renovate a property. These two factors are heavily considered by many investors. 

Finding a House to Flip…

The first step in the process is finding the right property at the right price. If you overspend, you cut into your profit. As a result, It’s important to utilize the 70% rule. This rule is a guideline that many experienced flippers employ. This rule requires the investor to buy the property at just 70% of the after repair value/ARV, less the rehab cost. This number provides you with a reno budget as well as the amount you should spend to purchase the house. You’ll need to utilize all of your resources to find houses. These resources include:

• Wholesalers 

• Auctions  

• Foreclosures 

• Short sale negotiators 

• Your real estate network 

• MLS  

Assessing and Funding Deals

You’ll need to estimate the property’s value in its current condition to make an offer. You’ll also need to determine your closing costs. In addition, material and labor will need to be calculated as well. Next, you’ll need to come up with a timeline to complete the renovation. Add in your taxes, the cost of holding the property, and your utilities to come up with a realistic budget. This cost should also include permits, water and sewer, and HOA if there is one. Your ability to develop a realistic budget will help you to avoid overspending. However, there should always be some money set aside for unexpected costs. You’ll need to take action quickly to avoid wasting time and adding to your bottom line. Speed and numbers are is everything when it comes to flipping. You’ll need access to funding sources to cover both short and long-term costs. 

Risks

House flipping does carry a  lot of risks which means you’ll need to know how to manage risks to diminish and avoid them. Risks come in many forms from contractors who may slander your good name if they’re let go, to squatters and tool thieves breaking into your property and squatting while you’re away. You’ll also want to avoid overspending. You need to know what your target buyer values and capitalize on this. Don’t overspend on supplies. Find ways to find budget-friendly deals without compromising quality.  YOu cant always avoid pitfalls and risks but you can position yourself to minimize the risks as much as possible.