Thanks to a popular misconception, house flipping has become a very popular alternative way for people to try and make some "quick" cash. People think that house flipping is easy, however, this is not the case.
What has caused this common misconception? Unless you live under a rock or in a cave, chances are that you have seen a house flipping television show or two that makes the process of flipping a house look WAY TOO EASY (although there are many other various forms of media that claim to have the answer to making a quick buck).
There are plenty of house-flipping television shows with couples or other groups that flip houses together often can make the process look simple. The "house flipping professionals" on these popular reality shows are almost always successful and tend to make make a ton of money (and FAST).
Their narrative: Simply find a cheap home that is for sale, put a little bit of money into it and fix a few things. As long as you do that, you will earn a large profit and everyone will be happy. However, that is not always (and oftentimes not) the case.
House flipping CAN be a profitable venture. In 2019 alone, about 250,000 homes/condos were flipped (about 6.2% of the market). However, many people think that flipping houses is easy and step into the game way before they are ready.
The truth is, the art of house flipping requires a lot of work and knowledge about the real estate market. You cannot simply walk into a home without any experience and fix it.
Luckily, almost anyone CAN learn the art of flipping houses (it is an art). It takes vision and knowledge to take something that is broken and make it beautiful.
If you want to flip houses, this guide is a great place to start and learn the basics.
Here are some things to keep in mind if you are thinking about beginning your journey:
You Will Need Money
Putting money down on a house will give you the best finance rate.
Unfortunately, if you have little or no money of your own to invest in house flipping ventures, getting started won’t be easy.
You can no longer get mortgages with nothing down (and if you do, you are the exception). Lenders view house-flipping as a risky venture. Furthermore, if you are new at flipping, vendors will view you as even more of a risk.
Once you are successful, you are more than likely to get a loan as you are viewed as more reliable. Until then, you will need a large sum of money down to avoid high interest rates.
Know The Current Market
Knowing the market will help you determine at what time is the best time to buy as well as if you are getting a good deal.
If you don’t know the market, do some research! Research your local real estate market to learn everything that you need to know.
How fast do houses sell in the area?- Make sure to know what you are stepping into as far as turnaround before making an investment.
Repair costs can be more than you realize. Even if you think that there aren't many repairs that need to be made, you should have an inspector take a look (especially if you are new to real estate).
Beyond basic repairs, you will also need to set your house apart from other houses. Buyers look at a lot of houses and they all tend to seem the same after a while. If you add some nice(and even simple) additions that other houses tend not to have, your house will be more memorable.
A few areas you can focus on if you are not sure where to start with repairs:
The kitchen- Focus on important focal points of the kitchen such as the cabinet doors, walls, and countertops. You will also have to take a look at the appliances, most people do not want to move into their new home with appliances that are more than a few years old.
Bathrooms- Nice bathrooms are one of the most important things that people look for when purchasing a house. A rusty tub and stained sinks are a big no-no for buyers. Luckily you can remodel a bathroom for cheap by looking for low-cost lookalikes, refinishing the tub, installing new faucets, adding new cabinet hardware, and doing some other quick and cheap fixes like this article suggests.
Curb appeal- It's much easier for a homebuyer to be interested in the inside of your home if the outside looks nice. Adding some little details if you don't have a ton of money to spend on the outside of a home can make a big deal. This can include planting some flowers, replacing some outdated hardware (such as the mailbox), painting the front door, etc. can get more potential buyers inside.
Staging the house- As you may know, it is important to stage your flipped house before putting it on the market. Staging the house helps the potential buyer focus on the interior of the home. An important tip to remember is to focus on decorating the house in such a style that pleases the majority of your target market, not what your personal style would be.
Additionally, make sure to check our competition in the area to see what they are doing as this will give you some great ideas.
If you want to resell a house, the most profitable way to do so is by having an idea of who your potential buyers will be.
For example, is your house a starter home? What income would someone have to make to afford your house?
Ask all of the questions you can think of in terms of who may buy your property from you. Once you understand your buyers, you will know their ideal price point, what they are looking for as well as what they want to avoid. That way, you will be able to tailor renovations and improvements to their needs as well as their price point.
If you are new to flipping houses, you may want to hold off on the bigger houses and projects until you have more experience as well as more cash to invest.
A good place to start would be a single-family home with a renovation that will cost you under $30,000 or less. If you try to flip a large property with a huge renovation investment, you may be in over your head and end up in debt instead of with profits.
Flipping houses can certainly be profitable. However, if you want to make a profit you will need to understand the market, your clients, how to repair a house (and of course you will need some SERIOUS dough).
You cannot just wake up one morning and decide that you want to be a house flipper. However, with the right amount of money, experience, and knowledge, you might just have what it takes.