If you're a fan of the home improvement shows on HGTV and other networks, you've probably dreamed about trying your hand at flipping an investment property and making a hefty profit. The lure of transforming a tired old house into a desirable home is powerful. While it is possible to make money, and maybe even a living, from flipping properties, you need to do your research before jumping into this exciting but risky endeavor. Here are some tips you need to know before you jump in.
Find the Right Partners
The process of flipping a home is a lot more than sketching out a pretty design on paper. There's a lot of physical work that will need to be done, much of it by skilled tradespeople. You'll need to find the best electricians, plumbers, and other professionals to ensure all the work is done to the highest standards. In return, your subcontractors will expect you to provide them with what they need, including a written contract, fair payment, and the necessary utilities to complete their work.
Today, tradespeople of all types rely on laptops and tablets to enhance their work. Investing in an uninterruptible power supply is a good way to protect everyone's vital data and ensure that work can continue even in an electrical outage.
Select the Best Property
Of course, before you can start the work, you need to find the right property. Ideally, you'll find a house in an up-and-coming neighborhood that you can acquire at the lowest price possible. To do that, you need to have a deep understanding of the local real estate environment.
Study the housing market, attend open houses in your target neighborhood to get to know the competition, and consider working with a realtor to help identify the ideal house for your first venture.
Focus on Your Finances
While you're searching for that perfect property to flip, make sure your finances are in order, so you're ready to make an offer. The best possible scenario is to buy the property with cash since you'll avoid the fees and interest associated with taking out a loan. Additionally, loans for investment properties tend to be more expensive and harder to obtain than conventional mortgages. If you do need to apply for a loan, make sure your credit is in tip-top shape in order to increase your chances of approval. Check out these tips for improving your credit score fast.
No matter how you end up financing the purchase, you need to have a clear picture of how much you can afford. Conduct online research or interview construction professionals to understand the average cost of different projects. Keep in mind that the cost of a new roof or replacement windows can vary greatly depending on your geographic location, so try to hone in on specifics in your area. Develop a realistic budget and then add a buffer to cover the inevitable unexpected expenses that will arise.
Make Strategic Choices
Once you've found and purchased your flipper home, stay focused on your goal, which is to make a profit. Remember that you aren't going to live in this house, so put your personal style preferences aside and base your decisions on what will be appealing to the widest audience.
Be strategic with your budget, allocating it to the projects that will bring the highest return on investment. Take a look at other houses in the neighborhood to discover what buyers will expect. Is it hardwood floors, a garage, or high-end appliances? As much as possible, incorporate those amenities into your design so the house will be well-positioned to sell.
Flipping houses can be profitable and fun, but only if you do your homework first. By understanding the local market and selecting the right property, finding the best professionals to work alongside you, creating and sticking to a budget, and strategically focusing your efforts, you can make money while providing others with their dream home.