You’ve probably heard of house flipping, whether it’s from the dozens popular of T.V. shows, your neighbor, the news or a magazine. House flipping is one of the hottest investment trends out there today. There are many different aspects and things to take into consideration when house flipping. The three main objectives listed below of house flipping are simple, but the execution requires a lot of work, research and planning.
- Buy a house
- Fix a house to be desirable
- Sell the house and make a profit
If you have ever thought about jumping on the house flippin’ train, then this blog is for you. Below are some of the most important things to know and plan for before you decide house flipping on your own.
- Know where and how you will get the money, unless you already have it lying around. Look for a partner, hard money lender, and/or a private money lender.
- Have an ideal price range you are looking to spend, and start small. Look up desirable locations and find the most run-down house in it. Study the market and find something that you know will sell quickly.
- Repairs are going to be needed, that is the name of the game, after all. Know what aspects of your home to invest your time and money into. Showcase the best aspects of the house. The kitchen and bathrooms are usually always the highest selling points. A fancy sink, counter top, knobs, cabinets and handles go a long way. You also want to keep things simple, neutral and pick quality over quantity. Look at what the neighbors are doing and research design trends. Then, pull out a magazine, grab photos off the internet figure out what you like and start creating your vision!
- Find a good contractor who you trust, this is very important because a lousy contractor can end up costing you a lot of money. Ask anyone and everyone for recommendations, talk to people who have experience house flipping, join an REI club or Facebook group, attend meetings and read posts. Get your hands on all the information you can and do as much research as you can before you start!
- Sit down with your contractor and know what repairs will be needed and how to estimate the cost of those repairs.
- figure out a budget and your ARV (after repair value). In order to find this you need to look at comparable properties. The most accurate way to do this is to gain access to the MLS (multiple listing service) and look up recently sold comps that sold in the last 90-120 days, within 1/2 a mile to 3/4 a mile, close in size, square footage, bed/bath count, and age. Next, find your cost of repair value. A good rule to use is the $20.00 per sq. ft. rule. For example, if you are buying a 2,100 sq. ft. home, you can expect to spend $42,000, for luxury homes this will cost more but it is a good rule of thumb that many experts recommend to use for standard homes. Make sure your contract with your contractor is very specific, and have a clear understanding of deadlines for your contractor and what the penalties will be if they are not met.
- Once you have this budget and a general idea of what you like, go to the hardware store and pick out what you like, write down their SKU’s and show your contractor. They can help you make the best cost efficient choices and give you their professional insight.
- Make sure you keep an eye on your holding costs and factor these into your budget, keep in touch with title companies and any other parties you are working with. Stay organized and be on top of deadlines.
- When you finally list your property (and do so ASAP) make sure it is extremely clean and staged nicely. Be wiling to negotiate and go lower on your asking price.
- Watch your hard work pay off! Take notes on what went will and what did not, take it into account for your next project and you will be a pro at house flipping in no time!