Property can be a great investment long-term. In fact, many people buy one or more investment homes over the years and hold onto them to build capital growth and income. However, these days people are having a lot of success flipping houses too. This is where you buy a home with the intent to hold it only long enough to renovate it and then sell it again for a profit.
Of course, there are plenty of profits when you flip houses correctly. However, many things can go wrong, too. Here are some ways to increase the likelihood of a successful result when you flip your first house.
Set Yourself Up Financially First
It’s critical to get in a good financial position before you buy your first property to flip. Having a cash buffer available if you need it helps you cover any renovation or other blowouts. It also ensures you don’t have to sell the home before you’ve finished doing it up. You don’t know how long it will take to sell the property when you’re done, either. So cash reserves will help you handle holding costs as long as it takes.
Being as financially set as possible first will enable you to find a better mortgage option too. That way you pay lower rates and enjoy improved terms and conditions. Lenders are particularly tough on those getting a loan to buy and flip a house. This is because this strategy is riskier than occupying premises yourself or renting them out to tenants.
As such, check your credit report before you start applying for loans and have any errors on your file, such as other people’s outstanding payments under your name, cleared up. Also, pay down as many debts as you can as soon as possible. It’s wise to look into potential banks and other financial institutions that view flipping more favorably and offer excellent rates and terms. For example, you can try searching online for “mortgage, Virginia Beach” or “home loan rates in Denver” or something similar to find potential lenders to contact.
Do Your Research
Successful house flipper never skimp on research. To maximize profits and reduce risks, learn as much as you can about market preferences in the area you want to buy in. Discover what homebuyers most value, such as bedroom numbers, extensive gardens, home offices and granny flats, single-story dwellings, pools, smart-home and other tech features, or other features.
Determine if the main buyers in the area are young families, couples, singles, retirees, or other buy types, and what kind of maintenance level they prefer in their homes. You also want to know if they pay more for luxury fittings and fixtures or whether more budget offerings will be the best value for money choices for you when renovating.
Attend open houses and auctions. Also read up on sale prices online to discover what properties are selling at what prices. Plus, it pays to get to know realtors who specialize in your location. Ask them about the market, trends, what’s worth investing in, and so on. Learning about pricing will help you better negotiate the purchase price and understand when to snap a good deal up.
Find a Reliable Team of Contractors
Unless you have a wide range of trades-based skills you’ll need to surround yourself with a helpful group of contractors. These short-term projects are meant to be done in a “get in and get out” way, so the idea is to fix up properties as quickly as possible and put them back on the market again. Working with multiple contractors will help make this happen.
Another secret for a successful house flip is to create a schedule for all the work that has to be done. This will allow you to better manage the project. Smart planning will save you time, stress, and money. After all, who wants tradespeople waiting around while someone else finishes their part of the work?
Set a Budget
Before you even begin looking at or making offers on properties, set a budget for the project. You need to know how much you can comfortably afford to purchase a home. You’ll also need to know how much to set aside for remodeling. Factor in extra fees like demolition and rubbish removal, shipping, and insurance. Don’t forget closing costs too when developing your budget.
Always keep a buffer of at least 10% to 15% free to cover any potential unexpected costs along the way, as these arise for most flippers at some point.
Flipping is something you’ll get better at and learn more about as you go along. However, following a few good practices will always help you make the project more likely to be a success.
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