So, have you decided to flip a house? Well, it’s a good idea to make some good profit. But, remember, successfully flipping a house would require a lot of different things to consider for the process to go smoothly. To put it simply, the whole process is not as easy as it appears. While many people are making money through house flipping every day, it’s true that they know how to do it properly. There are some secrets to success in house flipping. Our team at Top Remodelers has contacted the experts in the house flipping business and has come up with the success tips for house flipping here. Read everything and get benefited…
It’s all about Math:
Math is important for all the businesses. But, for house flipping, the success is all about math. Before you decide about paint colors, new countertops, and even before the demolition, you must understand the math involved. We can say that math is just like a crystal ball that would help you see the future. This is what will show the appropriate improvements to make. More importantly, math will let you know if you could succeed or fail in the business.
However, we could see many people struggling with the math. They look at a dilapidated house and immediately start thinking about the beautiful additions they could to do it. They often fail to see the math behind it. So, what’s the right way?
Be clear about what you can spend on the house buying, as well as the home renovation. In this, you must include how much risk you could take overall. The important price factors should include the cost of carrying a short-term loan if at all you need one, taxes, utilities, and the maintenance for up to one year. Don’t forget to include the material costs and labor in this. If you are not sure about the prices, look at the comparable sales in the current market and see the probable sale price.
Once you have a proper financial plan like this with you and yes, with a reasonable margin for risk, you can go ahead with the shopping for homes that falls within the budget.
Success lies in the Right House:
Well and now, you have a proper financial plan in front of you and you are confident about it. Now, the success of your house flipping lies in finding the right house. We would say this is really the most difficult step because not only you need to find the house that needs some renovation but also you need to find the one that could be bought at the right cost. Above all, you need to find the house that has repairs your remodeling contractors feel comfortable doing.
For those who have already got some experience in the business, the task of finding a house might be easy. But, for the first timers, we would advise to partner with someone with a lot of experience. Alternatively, you can with a home that requires a minimal renovation. In order to confirm this, you need to do a thorough inspection. While doing so, make sure you are there with the inspector so that he can point out the list of things to you. This way, you can also ask questions to him and thus, can get to know about the overall condition of the home.
We would also recommend you to inform the inspector about your plans about the house flipping. It’s because the investor inspections will be quite different from that of the owner inspections.
Time of Buying and Selling:
Time of home buying, as well as re-selling, is very crucial when it comes to success in your house flipping business. According to our reports, a great time to buy the house for flipping is in the late fall or winter. There’s a reason for this. There will not be much competition in the latter part of the year and hence, the sellers who have got their house for selling on the market at the time will resolve it to sell at the lower prices as they want to get it sold, however.
So, when you shouldn’t buy at all? Spring is the prime season for house selling and hence, if you are going forward to buy during this season, you may end up in higher costs. The higher the cost, the lesser the profit you can gain from the home flipping. But, wait, spring is the best season to sell your homes for the same reason. So, if you can get everything completed in time, you can capitalize on when most of the buyers are looking for the homes.
Also, long term flips will also be great as they could prevent you from paying capital gains taxes. But, this is not without any risks. The market can completely change during your flip and it’s likely that your potential profit may be swallowed by the economy.
Study your Market:
It doesn’t matter what is being said on the TV. What actually matters is what’s happening in your locality. You need to be well aware of what is going on your own town, city, area, and so on. Remember, this is your niche. Try to answer the following questions about the market:
- Is that area an already established area with increasing prices?
- Is that an area with reputed schools that will attract families with children?
- Is this a community famous among retirees?
- Does the area have a transitional neighborhood?
- How about the demographics?
If you know all this stuff, you will be in a better position to choose your niche. If you are clear about your niche, you can determine your profit margin quite easily.
The expert suggestion here is to do your homework on the recent sales, competition, and the average number of days houses like yours have sat on the market. We swear that all these information will help you differentiate between a good deal and a bad one. Also, this will help negotiate prices both as a buyer and a seller. More than this, this knowledge will help you determine what type of house flipping you want to carry forward.
Get to know your Buyers and Renovate with them in Mind:
Once you get to know the local market, you must also make sure what type of buyers are in the area. For instance, if the property is located in a neighborhood with reputed schools, as we mentioned above, then the buyer could be a young family. The older homes might have all the modern amenities that are demanded by the younger families. They might be looking for an open kitchen or a family room as seen in the modern homes.
In such a case, it’s wise to spend your money making the family rooms open and welcoming. The expert advice in this area is to make sure there are sufficient bathrooms for the kids to use. In this, ensure to build a master bathroom if at all not present already. On the other hand, if you are buying acreages in rural areas, the buyer could be a horse guy or older family. You must make sure the facilities in your home are meeting their needs.
However, remember that there is no magical rule or what you called as a proven formula that would surely work for everyone. It’s just that you need some common sense to make it very successful.
Adhere to your budget:
Yes, it’s nothing wrong in wanting the high-quality finishes for your home. But, in this again, you need to check out the neighborhood. If it doesn’t support the same, you will end up over-building your home. And, the result will be that you will not be getting your money back. But, you know the whole reason you are planning to do flip a house. Yes, you want to make money.
Once you have got an idea on what needs to be revamped, ask your real estate agent or hire one to take a look at some of other houses in your neighborhood. Let them look at the feel that is being offered by other houses. This way, you can see what is welcomed in the area.
Now, you would know what needs to be renovated and what the competitors are offering. Thus, you can come up with a proper budget. At the minimum, we would say that you need to upgrade your house to be in line with the other houses in that area. If you need to make more profit, you may include in your budget more renovations to make your home stand out. But, at any case, make sure you are adhering to your budget.
Finally, whenever your budget is done, make sure to double check whether you have accounted for all the repairs, as well as upgrades, and add around ten percent for overruns.
Inform your Buyers:
You have taken a lot of efforts to make your house a beautiful one. Make a list of all the things you have done and let your buyers know about each and every system that was replaced. Don’t limit this show-off business only to your buyers. We would suggest you inform each and everything you did for the house to the real estate agents, inspectors, as well as appraisers.
Examples to be included in this list would include the following items:
- Electrical stuff
- Structural problems that are fixed
- Hot water heater
- Security system
- Sound system
- Lighting controls
- Sprinkler system
Remember, all the minor updates you make can save the buyer from encountering the problem at a later point in time. When they see what you have done, they would get the peace of mind. So, there are warranties on your renovations or repairs, let your buyers know about it. They will feel happy about the deal.
The experts suggest that put everything that has created value for the house in a binder and leave it on the table. In a nutshell, your aim is to inform everyone who walks into the house to know everything you did to increase its value. This is how you can sell a house in a flipping business.
No matter what your business is, put your wisdom, common sense, and honesty into play. Let these traits guide you. And, the success will be yours. If you approach your house flipping investing the right way, equipped with right tools, and have a good mentor or an experienced professional to coach you through various situations, there will be nothing to fail! Yes, believe us, you won’t fail at all!
Yes, we agree that house flipping is a lucrative business. But, if you could just take the time to learn about it, you can build a beautiful business for your life.