House flipping is known to make many real-estate investors rich over time. It’s the art of buying a property and elevating it to a point where it sells for a higher price. It involves fixing the problems and installing systems in the house to make it homely and comfortable.
You need to decorate the house to be in a good shape and fix various systems and appliances like air conditioning, gas, furnace, high-quality water softeners, etc. But there’s more to becoming a house flipper who bags thousands of dollars in a year. Keep reading to understand what you need to do to become a successful house flipper.
Table of Contents
Choosing your market
This is the first step while buying a house that you want to flip. You need to choose a good market. It doesn’t help to buy a property in an area where there’s low selling. It involves high risk. You can be stuck with a property for a long time or suffer loss in a deal. With real estate, location is crucial that’s why you must put your heart and soul into market research.
Here are some things that you should consider:
- Population: You must choose a town or a county where there are enough people to make a deal. You can have that many deals in a town with barely 50k or 100k people. This is an incredibly small market where you can sell only once or twice. A sweet spot is the population of 500k where you can make multiple deals with different kinds of people.
- Price point: You must stick to your price point no matter what, or unless you’re getting a miracle house. There is a house flipper who flips luxury properties and do very well but beginners should steer clear of that. Places like New York or California have expensive houses. If you want to flip here, you can look for properties nearby — houses that are 1–2-hour distance away from the main city. They’ll be cheaper and people buy such properties to be closer to the city.
- Inventory Level: You must analyze how quickly properties are being sold in an area. There’s a time duration that’s best for house flippers and it’s 3-4 months. If a new house shows up on the market every three to four months, it means the area is quite active in terms of buying and selling. This is perfect for flippers as you can easily buy properties, and they’ll be sold quickly.
Building a Team
You can’t flip houses alone. Any flipper who’s saying he doesn’t work with a team is just bluffing. He has people who work with him but not as team members. Having people on your team is quite useful as you can create selling strategies together. A team will have your back no matter what and will support you during tough times.
You should have these professionals on your team:
- Real Estate Agent:
- Contractor
- Lender
- Title Company
Evaluating Deals
Evaluating deals is very important for you to analyze your profit and set a selling price. There are many formulas in the market to calculate your total profits but you don’t need them. The key is to find profit which selling price minus cost price. So, calculate how much money did you actually spend.
Your expenditure includes:
- Purchase Price
- Construction Cost
- Realter Fees
- Lending Cost
- Holding cost (taxes, utilities, etc.)
- Other small expenses
You can maintain a sheet where you enter all your expenditure so you can keep track of the money. This helps you set an ideal selling price that’s fair to you and you don’t incur a loss.
Finding a deal
Wholesalers
Finding a deal is the key to making a profit. What will you sell if you have nothing? A great way of finding that is through wholesalers. There are people who find deals for you and sell them to you for a higher price. That’s how they make a profit.
A wholesaler will find a deal or house of $100,000 and will sell it to you for $120,000. You analyze whether that property is worth $120,000 or not. Use the evaluation formula and see if you can make that work. If yes, then buy the property from the wholesaler.
It’s quite simple as you can leave the hassle of looking for properties once you find the market. It’s a difficult task and one gets tired pretty easily. So, it’s better to buy from a wholesaler.
House flipping is quite lucrative. With a little guidance and some experience, you can really become rich through this business. Follow these basic tips to get started and work your way up from here.
Meta title: Things to Remember While Flipping Houses?
meta desc: House flipping is a lucrative business. If you play by the rules, it can really make you rich. Discover everything you need to know about being a great house flipper.