Maybe you have heard about the business of house flipping and how savvy individuals have turned huge profits. Television shows have been dedicated to teaching viewers how to start flipping houses, and you might have gone on a journey with the flippers through their ups and downs. Behind the scenes, flipping houses in Arizona can be either a lucrative business if approached correctly or a complete failure if you don’t know what you’re doing. By doing a little research, aligning with the right resources, and following a few helpful tips, you could be on your way to a new successful house flipping venture.
Research Your Target Area
Once you have decided on the general location for your first flip, you should take some time to do in-depth research on the different areas of the city. You can change many things about a house, but you can’t change the location.
You will want to invest in a home that has excellent resale value, so the neighborhood, school district, and proximity to desired amenities can all be important factors to consider. Use multiple resources to cross-check your findings, including popular realty websites, realtor connections you may have, and knowledge from the locals. Even though it might be tempting to find the lowest priced house available, you always want to look for a house in an area people want to live and where house prices have been rising.
2. Form a Realistic Profit Estimate
It’s not uncommon for new flippers to become disenfranchised during the process of a flip if unrealistic expectations were set in the beginning.
When looking for a profit-turning property, many factors should be considered to determine if it makes true economic sense.
- Accurate estimation of renovation costs. Before embarking on a house flipping venture, you need to have a solid sense of the cost of a variety of renovation projects. The cost of electrical, plumbing, drywall, flooring, tile work, and other renovation projects vary depending on the area, so take some time to gather average costs.
- Accurate estimation of renovation timeline. Realistically forming a project timeline and adding in a buffer for if and when things go awry will help you set your expectations at the right level.
- Prepare for the worst. If you are buying an older home, or if you aren’t sure about the condition of the home, estimate a financial buffer to determine if you would still earn a profit if major issues, such as structural problems or asbestos, are discovered during the renovation.
3. Arrive with Access to Cash
Money talks in the house flipping business, and in most cases, you have to have money to earn money. If the property in question has the potential to be an excellent investment, you can be sure that others are looking at the same property. In order to give yourself an edge, you need access to money quickly. As you progress in the business, you can use the profit from previous flips to start on a new one. If you are new to flipping, you will need cash assets from your own personal finances or from a source such as a hard money loan. A hard money loan can provide quick money through a short-term loan that doesn’t require extensive wait times or strict criteria.
4. Hone Your Negotiation Skills
Even with money in hand, a savvy flipper knows negotiation is key to the best price. If you are not a skilled negotiator, brush up on this skill before you begin your first project. You might be up against experienced Arizona home flippers, so go into the negotiation process knowing you might not end up with the property. Set a top price you would be willing to pay in order to make money on the property since it’s better to walk away than end up with a poor investment. Try not to get carried away in a bidding war by setting realistic expectations about renovation costs and potential profit.
5. Choose the Right Renovations
Choosing the right property is only half the battle. Once you have secured your flip, you need to make sure the type of renovations you perform are at an appropriate level for turning a profit. After prioritizing the essentials, like roof repair, electrical, plumbing, or addressing damage, you will need to decide on updates and finishes. The focus should be on resell, and not solely on your personal taste and preferences.
An important tip is to make sure you don’t over-renovate. Your choices should result in the maximum return of investment without skimping on quality and style. Small touches like molding, wainscoting, nice fixtures, and high-quality faucets are inexpensive upgrades that make the home look more upscale. Try not to over exaggerate current trends, while still paying attention to preferences of the potential home buyers in the area.
6. Hire Quality Contractors
When it comes to buying a property to flip, you want to try to get the lowest price possible. When it comes to hiring contractors to complete your renovations, you need to consider more criteria than just price. If flipping houses will be your new business, you want to keep a reputation for quality flips, and one of the best ways to do this is to hire a contractor with excellent reviews and reputation. Don’t be afraid to ask any potential contractor for references before hiring, and make sure you check them. You need to find someone who does quality work, sticks to a deadline, and has a fair price.
Any quotes you get should be in writing. Most home flippers start researching and vetting potential contractors before they begin their first project or even put bids on their first property. Several websites are available to help you make educated decisions about experienced contractors and other vendor options, so utilize whatever resources you have available.
7. Sell Your Property Quickly
After you have completed your flip, you want your hard work to pay off with the best profit possible. The easiest way to do this is to unload the property as quickly as you can since carrying the property for too long increases your monthly expenses and eats away at your total profit.
Getting the word out through networking with potential buyers, or using a realtor if you don’t have experience listing houses yourself, can help you sell the property quickly.
Most importantly, your flip won’t sell quickly unless it is priced right for the market. Through proper research of market trends, comparable recently sold homes in the area, and getting the word out about your property, you can increase the likelihood for a quick turnaround.
Get Started with Your New Flipping Business
If you feel comfortable that you have properly learned how to start flipping houses in Arizona and you are ready to get your new business started, securing capital for your venture will be one of the most important steps. If you are looking for a short-term hard money loan or financing through a private lender, Capital Fund 1 is here to help. Contact them today for more information or to apply for financing help.