Flipping houses makes for some pretty great reality television, because combining home renovation with real estate can be exciting and dramatic. It can also be incredibly risky, though, which is why anyone who considers trying it for themselves should really do their homework. Yes, it can be a fantastic way to make money, but it isn’t exactly something that you can get into without any sort of preparation ahead of time. There is a ton to learn when it comes to purchasing the right fixer-upper, getting it spruced up and then flipping it for a high enough price that you walk away with a profit (and not thousands of dollars in debt). So, before you go out there and buy your first property, here is a basic beginner’s guide to fix and flip ventures.
Do Your Homework
Before you even start thinking about picking the right property you need to brush up on real estate and all that comes with it. Start early and do tons of research – and not only on the housing market in the area you are thinking of buying, as you might miss out on something better elsewhere. And don’t expect to do all of this on your own either. If you’re serious about turning this into a career, you should think about drawing from many different sources for your new education. Consider taking a real estate class, read as many books as you can, talk with friends and professionals who are already in the game, and check out any and all seminars that you come across. You can’t expect to pick the right property to invest in if you don’t understand the game.
Can You Afford to Fix and Flip?
Breaking into the house flipping game can certainly make you a lot of money in the long run, but it isn’t something you want to try if you are already hurting in the income department. Sure, you could invest all you have in one property in the hopes that it pays off and you make double what you put in, but is that a risk you want to take as a beginner? (The answer is no, in case you weren’t sure.)
Any investment comes with risk, so you want to be in a place where you can absorb that risk if things don’t go your way. Figure out your finance options before you buy, whether you actually have enough saved up or you need a loan of some sort. A newbie might want to look into a hard money loan, as those can be easier to get and are due in around one year – meaning it will be a pretty quick flip, but that’s okay, because the longer the flip takes, the steeper your loan payment.
Don’t Be Impatient
Once you are ready to buy, don’t let impatience cause you to pounce on a property that you shouldn’t have. Take your time and wait for the right investment to come along. After all, you want this investment to pay off, right? Waiting for the right opportunity might take longer, but it will pay off in the end.
Work as Fast as You Can
We aren’t saying to cut corners, but you will definitely want the sprucing up stage to go as smoothly and quickly as possible. The longer the rehabilitation part of this journey takes, the longer your new investment property sits on the market and the less profit you bring in at the end of it all. The reason for this is because of all of those little costs that add up over time, like financing and insurance payments. Shooting for a turnaround period of six to eight months is pretty ideal, so make those improvements fast, but do the job well.
The House is Flipped. What Now?
The house is done, and you’re ready to make a profit. Consider your options. Are you looking to put your newly renovated place on the rental market? You’ll need to understand the ins and outs of a rental property inspection, post ads, and screen tenants before ever benefiting from your first rental check. Perhaps you’re hoping to sell it and turn a quick profit, as is the case with many fix and flip properties. Be sure to enlist the help of a licensed realtor and understand the timeline that comes with selling a home in your area – it could take longer than you think to sell.
Flipping a house can be a fantastic, profitable investment, but it’s rife with challenges. Consider the above before dipping your toe into the fix and flip waters.