Television and movies might have sparked your interest in flipping houses, but it is essential to understand the process is not as easy as it may seem. House flipping requires a solid amount of working capital, time, and patience to be successful.
Before you quit your day job and decide to venture into house flipping, take a close look at all of the details it requires. Luckily, we’ve done all the research so that you don’t have to. Keep reading for all you’ll ever need to know about how to flip a house.
To flip a house is essentially the art of buying a home for below market value and, after renovations, selling it for a staggering profit. Typically, these homes are found and purchased through property auctions, short bank sales, or foreclosures.
If you want to flip a house and be successful in doing so, it requires you to spend your money wisely and only invest in undervalued homes. Unfortunately for you, this typically means these homes will need a substantial amount of work to be fixed up and resold.
As a successful house flipper, you will also need to wisely invest in renovations that are known to increase property value and attract potential buyers’ interest. Once these renovations are complete, you will immediately list the property.
There is a sector within house flipping that only requires limited renovations, which is known as microflipping. This option might be a better idea for you if you are more interested in fast sales than renovating properties. While traditional house flipping usually requires significant renovations for resale, microflipping is seeking opportunities with minimal renovations required.
Microflipping requires your ability to analyze and identify opportunities to purchase properties that are currently undervalued. The idea behind microflipping is to flip it and sell it quickly. The success behind microflipping comes from the high volume of transactions.
While we would all like to be the kind of high-flying real estate tycoons that can pluck up downtrodden properties and turn them into jewels that sell for 20-50% ROI, in reality, if you want to flip houses, it is significantly more complicated than it appears on television.
With today’s recovering real estate market and considering many people have gotten in on the game, the house flipping arena has become extraordinarily competitive. Today, the best deals go quickly, and even solid properties with house-flipping potential are becoming increasingly harder to find.
Another thing to consider is that you also need substantial cash reserves to get into the business if you don’t plan on taking out mortgages.
The costs associated with flipping a house will vary greatly depending on many factors, some of which include acquisition costs, renovations, and the amount of time required to finalize the sale. As a general rule of thumb, here are some of the expenses you can anticipate if you plan to flip a house.
Flipping a house comes down to the math – you only want to make a purchase that you are sure will receive a return on your investment. Ultimately, the time and money you put into the purchase should come back as a profit upon the final sale.
While the cost of the home is one initial factor, there are more financial investments required in the process, including:
Money is not the only investment you will need to put into house flipping. Your time, which can be equally, if not more valuable, than money, is also required. The amount of time will vary depending on the scope of your project.
The ideal time to purchase and flip a home should run anywhere from six to 12 weeks in a perfect world. Unfortunately, as we all know, there are always delays in the world of real estate and construction that could cost you months at a time.
Flipping a house could end in a disaster or a dream, and a lot of the time, you have no way of knowing until you’re already too far down the rabbit hole. But, when done correctly, house flipping can be an excellent investment. The idea is to sell the home in a short amount of time, following wise renovations, and for a profit.
But it’s worth noting that there are definitely some house-flipping horror stories out there. The best piece of advice for anyone looking to get into house flipping is to do your research and do many of it. And, as an added security, get guidance from a local real estate expert.
Is there money to be made in flipping houses? Absolutely. The key is to do it quickly, but even more so, to do it wisely. One of the best ways to get a head start in the game is by teaming up with a local real estate expert.
Nobody knows your local market like a real estate agent, which means having one on your side through the process will help to provide you with the guidance and knowledge necessary to make educated investments.
So, you want to flip a house? That’s great. There are many opportunities out there to make a lot of money, but you must take the time to complete the necessary research before you jump in.
Understanding exactly how house flipping works is just the tip of the iceberg. Beyond that, you’ll want to find out all there is to know about turning a profit. And, for added support on your end, it is always recommended to work with a local real estate expert.
Matthew is the CEO of Evernest. He is a student of the book Good to Great and is passionate about building the best property management company on the planet (and maybe even the universe if Elon Musk will hurry up). You can usually find Matthew at the baseball field with his son, at a dance recital with his daughter, or at his favorite restaurant with his wife, when he’s not in the office. And if you can’t find him in any of those places, it probably means he’s traveling.