Updated March 2022
With an average home buyer wanting a move-in-ready home, flipping houses has become nothing less than an intriguing idea. But there’s more to it than buying, renovating, and selling real estate property.
So, what else is there? What does flipping a house mean? Is it a profitable business? How do you successfully flip a home? Well, read on to find out!
What Does House Flipping Mean?
House flipping entails purchasing a property then renovating it to sell it later at a profit. With most homebuyers lacking the willingness to renovate distressed properties, real estate investors take the opportunity to improve properties until they meet the buyer demand.
Is Flipping a House Profitable?
Sure, flipping houses may seem straightforward –buy a property, renovate it, and put it up for sale, right? Unfortunately, it’s not that simple. Despite being a dream for some, a house flip can also prove a disaster for others.
However, flipping houses makes an ideal and lucrative investment if done right. It often takes a short amount of time to do the necessary renovations, after which you get to sell the property at a relatively higher resale price range than what you paid initially.
Steps to a Successful Home Flip
You may have done your homework and decided to delve into house flipping. But how do you flip a house?
1. Research the most suitable real estate market
Flipping houses doesn’t quite apply to all markets. For instance, let’s assume you have $20,000 to kickstart your house flipping career. It won’t make sense for you to go house hunting in markets where properties start at $700,000.
2. Determine your budget and prepare a house flipping business plan
Like with other entrepreneurs, house flipping investors also need a business plan. You don’t have to make it fancy. However, it needs to include the project scope, a timeline, and an accurate budget.
Quick tip? Employ the 70 percent rule, which states that a property’s purchase price should equal 70% of its after-improvement value, minus repair and renovation costs. As a result, you’ll avoid overspending on a home that would have otherwise generated little ROI.
3. Confirm your house flipping financing
Before making a house flipping offer, see that you have a private lender who can easily finance the deal. Capital Fund 1 is an ideal financer of real estate projects in Arizona, Texas, and Colorado. One key thing to look for here is the interest rates – see that they don’t significantly impact your total project financing cost.
4. Network with contractors
Before fixing and flipping your first home, start building healthy professional relationships with contractors. That will enable you to get quotes before and as soon as the property is under contract.
5. Find a house to fix and flip
Finding good deals is yet another crucial part of house flipping. That includes acquiring properties below market value and with broad margins to cover the repair costs, carrying costs, marketing costs, etc.
Consider consulting wholesalers for off-market deals and a realtor for the ones on-market. Moreover, a direct mail marketing campaign may also help you find good below-market deals.
6. Buy the house
Unlike homeowner money lenders, investment property financiers move relatively faster, although the process can still prove time-consuming.
For instance, any house flipper in Arizona, Texas, and Colorado can begin the process by providing their details to Capital Fund 1, which will then offer multiple loan and interest rate options from which they can choose.
After that, the next step should be a proper home inspection to uncover any unpleasant surprises that may be hiding before settling on the property.
7. Renovate
After settling, let the work commence. The quicker you finalize the renovation project, the faster you can put the property up for sale and start paying off your loan.
Consider working with a reputable contractor here to avoid cases of a contractor bumping the project’s price amid the renovations.
8. Sell your successful flip home
Finally, it’s time to sell the house. For the most part, putting up the home for sale is handled by the realtor—another reason to hire an experienced agent who understands your market.
Finance Your House Flip Today
So, is flipping houses a great idea? Indeed, it is, but only if done right and with the proper funding. Capital Fund 1 has built a reputation as the fastest and most reliable renovations and house flipping financer in Arizona, Texas, and Colorado. So, reach out to us and watch yourself get it right the first time.
_____
Photo Credit: Poungsaed-Studio