Renovating and flipping houses is a time-consuming business venture when selling real estate. It can take months to find and buy the perfect property. Once you own the house, you must invest time and often money fixing it up. Before you can sell it, you must schedule inspections to make sure the property complies with applicable current building codes. Otherwise, you must spend more time and money to bring it up to code. Next, you must invest time to sell the property. If you show it to prospective buyers yourself, you must spend plenty of time commuting to and from the property.
Is selling real estate through flipping a property worth it, particularly when you consider that the whole venture might net you only a 10% profit? For many people, it may sound like a frightening proposition. To them, it may make more sense to stick with their day job, where they can earn the same kind of money in a few weeks or months via a steady paycheck, with no stress, no risk and a very consistent time commitment.
However, if you have that bug that just won’t go away, and your dream has always been related to selling real estate, flipping houses might just be what you have been looking for. If that is the case, read on to discover what is involved when it comes to flipping houses.
What Is House Flipping When Selling Real Estate?
House flipping when selling real estate happens when an investor buys houses and then sells them for profit. For a house to be called a flip, you must purchase it with the intention of reselling it fast.
There are two different types of house flipping when selling real estate. In the first case, an investor buys a property that has the potential to increase in value with the precise repairs and updates. After completing the work, the profit comes from selling the home for a much higher price than what it was originally purchased for. In the second case, an investor buys a property in a market with rapidly rising home values. No updates are made and, after holding the property for a few months, it is resold at a higher price to make a profit.
Steps to Flipping a House
If you want to try to join the house flipping population, here are some steps you should follow for success.
Finance the Flip with Cash
House flipping can be a risky endeavor, and it’s easy to see why adding debt into the mix only makes it more dangerous. Flippers who take on debt for their purchase pay interest for months, which only increases the amount they have to sell the house just to break even. Also, using debt to finance a flip can cause you to act out of desperation. If you can’t get the house sold, you might want to lower the selling price and cut your profit. Cash-only flippers can wait out a slow market. So, unless you can pay cash, the financial risk of house flipping might not be worth it.
Know Your Market
If you don’t have a good understanding of the market, you can’t accurately decide if you’re getting a good deal on the house you’re buying. Also, you will not be able to accurately identify the home’s potential value. Your vision for the home must fit the reality of the neighborhood, which also means you need to know how to price the house. If you need help, enlists the professionals in a local broker firm to help you understand the market and refine your home search. Later on, she can help you when selling your real estate.
Prepare a Budget
Waiting until after you purchase an investment property to make a budget is a bad idea. Know your price range for the purchase, for making any repairs, completing renovation projects, and selling it before taking any steps. You want to start this venture to make a profit when selling real estate.
Invest in Smart Renovations
If you’re renovating a house that you hope to sell for $200,000, don’t sink $50,000 into custom cabinets, high-end finishes, and a kitchen island. Do a smart renovation and focus on refinishing existing cabinets, adding granite counters and replacing appliances. While you might invest in a couple big updates on a flip, don’t underestimate the power of small upgrades. A fresh coat of paint, updated hardware, and refreshed landscaping can make a huge difference.
Enlist the Help of a Local Real Estate Expert
Can you make money from house flipping? When it’s done the right way, you can! If you’re able to flip with cash and stay in your budget for renovations, it’s very possible to make a great return on your investment when selling real estate. Whether you’re buying a house to live in for years or to flip in six months, a quality real estate agent can provide the market knowledge and practical guidance you need to make a smart investment.
Is There Always a Profit to Flipping Houses?