Last Updated on November 29, 2023 by Kimberly Crawford
When you were browsing the real estate market for your house, what exactly were you looking for? You were looking to see if it had everything a house needed such as amenities, a good neighborhood setting and easy access to shopping plazas. However, not all houses are like this.
Some houses may be in an ideal neighborhood but have next to no amenities, or in some cases, aren’t fit for human habitation. But maybe you want to make a difference and turn a bunch of run-down houses into everyone’s dream home, and you can through a process called house flipping. House flipping is when you look for homes that need a lot of work, invest in its renovation or reconstruction, and put it back on the real estate market.
Flipping houses is actually a form of real estate investment that can help you turn a massive profit. However, as with any kind of investment, this is something that must be handled with patience, diligence and caution.
Jumping into this blindly can yield anything but a profit. Before you begin your house flipping journey, you’re going to need to know what you’re up against, what you need to expect and what’s involved. In this article, we’ll be covering everything you need to be a successful house flipper.
Good Grasp on Your Finances
Just like with every other investment, you’re going to need to have a solid grip on your finances. Since flipping houses can be very expensive, you want to make sure nothing will get in the way.
One of the most common issues house flippers may experience is having too much to pay for in monthly expenses. Since you’re going to be forking out tons of money renovating and remodeling, you want to have every cent you can get.
Before you start, make a comprehensive budget that goes everything you’re currently paying for. A great way to be absolutely sure you list everything is to go over your bank statements.
Sum up how much you make each month; deduct the cost of every expense you currently pay for and see how much you’re left with. If you can cut out things such as eating out and the routine splurge, do it.
In fact, did you know you could potentially save up to $300 a month by simply refraining from eating out? You’d be amazed at what little things can drain your finances.
Another expense that needs to be taken care of as soon as possible is your student loan debt. Student loan debt is one of the most intrusive forms of debt you can have. However, there are plenty of ways for you to skirt around paying as much.
One of the best ways to reduce your monthly payments involve refinancing student loans. Refinancing is where you consolidate all of your current loan payments, which includes your student loans, and combine into a singular payment. You can also do this as a way to take out a new loan that can help you cover a lot of the costs that’s involved with flipping houses.
Research Areas That Are Good for House Flipping
Right off the bat, you’re going to learn how important researching is. It’s what can determine whether you make a profit or experience a loss.
You see, anyone can find a house that requires work before it’s rendered habitable again. But it could potentially be a wasted effort if the neighborhood isn’t popular or convenient. Let’s say you were currently looking at a neighborhood in California.
Before deciding to invest into the house, you would need to assess the surrounding area. How popular is the neighborhood? Is it convenient? What shops are around it? Does it require a car to get to and from? These are all factors to take into consideration as you look around. Think of what potential home buyers would want in both the house and the neighborhood.
What is Micro-Flipping?
Since flipping houses is an investment and will soak up a majority of your time, you could even go so far as to say it’s your new job. But as with any new job, you want to take things slow and get a feel for how everything works. It’s highly recommended that beginner flippers start off by micro-flipping.
Micro-flipping is similar to another process known as day trading. Day trading is another investment where you purchase cheap stocks and resell them within a day’s time. It’s not exactly as risky as flipping an entire house, or investing into actual stocks in the case of day trading, but it does give you an idea of what to expect.
In this case, micro-flipping is looking at houses that don’t need a lot of repairs or renovations. It’s a great way to learn the ins and outs of everything before taking on a bigger project.
Take Advantage of Sweat Equity
Equity is basically when you own assets that has some form of debt attached to them. Take home equity for example. Home equity is the difference between how much you’ve paid on the house and how much is currently left outstanding.
Homeowners often take out a home equity line of credit (HELOC) to pay for renovations and remodels. Sweat equity is somewhat similar in this regard. While you won’t be able to receive a payout like a HELOC, sweat equity allows you to essentially raise the house’s value from what it originally was. It’s the difference between the previous value of the home before any renovations were made to the market value after repairs.
Purchase the House and Let the Flipping Commence
Once you’ve settled on a decision, all that’s left is to purchase the house and begin flipping it. Keep in mind, however, that some houses may not need a lot of repairs or renovation.
Choosing to add renovations and make extra repairs is strictly a personal choice. But what makes these decisions mandatory is the current state the home is in. If it’s an old house, chances are that it’s going to need more repairs than renovations. Below is a brief list of potential problems that you’ll have to fix in an old house:
- Old, deteriorated roof
- A faulty and outdated electrical system
- Issues with the plumbing
- Problems with the foundation
- Mold infestation
- An excessive amount of radon
- Old, worn-out windows
Fixing up an old house is probably the most expensive house flip you can make. You’re looking at an average total of $170,000 to $250,000. In some cases, the cost of repairs is more than what the house is actually worth, which coincides with when we talked about sweat equity.
Things to Consider
All in all, house flipping can be an amazing way to invest into real estate. However, it’s also one that requires consideration and effective planning. You want to do your due diligence to ensure you avoid common home improvement mistakes that can be detrimental.
No one can jump into it and expect a house to sell the minute it’s placed on the market. Furthermore, every house you flip will be different from the last.
Some may require extensive work while others may require a simple tune-up. Make sure to take your time, plan your budget, research the area and decide whether or not it’s worth your time. If not, simply move on to the next potential home.
What are you supposed to do in house flippers?
There are a few different things that you need to do in order to be successful in house flipping. The first thing that you need to do is find a property that you think has potential.
Once you have found a property, you need to assess the condition of the property and determine what repairs or renovations need to be made.
After you have repaired or renovated the property, you need to list the property for sale. Once you have found a buyer for the property, you need to close on the sale and collect your profit.
Are house flippers worth it?
This is a question that many people ask when they are thinking about purchasing a home. There are a few things that you need to take into consideration before making your decision.
The first thing you need to think about is the housing market in your area. If the market is hot, then there is a good chance that you will be able to sell the home for more than you paid for it. However, if the market is not so good, then you may end up losing money on the deal.
The second thing to think about is the condition of the home. If the home needs a lot of work, then you may not be able to sell it for as much as you would like. On the other hand, if the home is in good condition, then you should be able to get a good price for it.
The third thing to consider is the location of the home. If the home is located in a desirable area, then you will be able to sell it for more than if it were located in a less desirable area.
All of these factors need to be taken into consideration before you decide whether or not house flipping is right for you. If you think that you can make a profit, then it may be worth it to give it a try.
How to start flipping houses with no money.
The first step is finding a motivated seller. The second step is to find a good deal. And the third step is to have enough cash to make the repairs.
There are a few ways to find motivated sellers. You can look for properties that are in foreclosure, or you can look for properties that are being sold by an estate. You can also look for properties that are being sold by a motivated seller.
The second step is to find a good deal. You can find good deals on properties that are in foreclosure or that are being sold by an estate. You can also find good deals on properties that are being sold by a motivated seller.
The third step is to have enough cash to make the repairs. You can get a loan from a bank or you can use your own money. If you have good credit, you may be able to get a loan from a bank. If you have bad credit, you may not be able to get a loan from a bank.
You can also use your own money to make the repairs. If you have the cash, you can make the repairs yourself. This will save you money on interest and you will not have to worry about making monthly payments.
Another option is to find a partner who has the cash to make the repairs. You can find partners by looking online or by talking to people you know. Once you find a partner, you can work together to make the repairs. This will save you money on interest and you will not have to worry about making monthly payments.