First-Time Flippers: How to Flip a House for Beginners
Are you striving to learn how to flip a house? Check out our comprehensive guide for tips, advice, best practices and more for your next venture.
Flipping houses has become a popular career prospect in recent years. With HGTV shows, people have seen the possible success that comes with remodeling and reselling properties at a higher price.
But what does it take a flip a house? How do you even know where to start? Once you do start, how do you know which direction to turn?
The truth is, flipping a house isn’t a particularly hard thing to do, but it does require time and dedication. Read on to learn more.
Research the Market
The biggest thing to keep in mind when it comes to house flipping is knowing the market. If you simply purchase a house without knowing the surrounding area, you’re not going to know reasonable prices.
This all matters because it helps you understand just how much you should spend on the property and the renovations. It also helps you find a decent price to sell it for.
Never sell yourself short by flipping houses in a bad market area, but don’t overextend yourself by shopping outside of your budget. Find a decent area within your budget and then work from there.
Research where people in the area want to live, and also know what they’re looking for in a property.
The more you know, the better off you’re going to be.
Create a Plan, Set a Budget
If flipping homes is something you’re committed to doing, you’re going to have to accept the fact that you are, indeed, an entrepreneur. What do entrepreneurs need the most when they’re first starting their business? A plan and funding.
Your business plan doesn’t have to be super detailed, but it does need to include a few things:
- Detailed project plan
To start, it might be best to begin with flips that only require cosmetic upgrades, like new paint, new flooring, or even new fixtures. As you get more house flips under your belt, and a reliable team to work with (more on this later), you’re going to find that it’s easier to take on larger projects.
Keeping it simple might be best when you first start out for financial reasons as well. You’re only going to be able to get so much funding for your first house flip.
The more properties you renovate and come back with a profit on, the more willing funders are going to be. This leads to our next point.
Line up Financing Beforehand
Make sure you have financing lined up before you make any moves. There is no worse place to be than having your offer approved with no way to purchase the property.
Finding a reliable lender to fund your project is going to be the best, and easiest, way to ensure that your project goes smoothly from the very beginning. Your first flip is already going to be stressful enough. There’s no need to add more pressure to yourself by not having the necessary funds to even begin your project.
It’s important to pay attention to interest rates for these loans, though. While they’re going to run higher than traditional home loans, it’s not going to matter much if you’re only accruing interest over the span of a few months.
Create a Network
Besides a lender, having reliable contractors and partners by your side is the most important element of any home flip. Once you’ve found a loan, and you’ve locked in on a property you’d like to flip, you’re going to need quotes for renovations.
Finding a general contractor can be a tricky thing. You should start by talking to other real estate investors, property managers, or builders. From there, you can speak even choose to speak with family or friends that have worked with contractors before.
It’s important to not solely trust these recommendations, though. You should also conduct research of your own. If you find that you’re having trouble with finding a reliable contractor, there are a few places you can turn.
Online resources like Angie’s List are great because contractors have to pay to be listed on the website. You’ll be able to find reviews on here as well, which is always a great thing to look into.
If you’re looking to speak with people in person, you can also pay a visit to big box stores first thing in the morning. You might see people buying a large number of supplies.
Generally, these people might be contractors looking for other opportunities for work. This method can be a bit risky, but if you vet the contractor properly before committing, then it can also be a worthwhile risk to take.
What if I Haven’t Found a Property Yet?
The best thing about networking is that you don’t have to have a property to begin building a potential list of businesses to work with. You can conduct research and make phone calls at any given point.
You may even find that you prefer this method. You can find a contractor you work well with, and you’ll have more time to ensure they’re the right person or team for the job you’re taking on.
Find and Buy a House to Flip
Whether you’ve found a contractor yet or not, you’re going to need a property to flip. To make sure you’re taking the right steps, it’s best to know you’re getting a good deal on any property you’re investing. There are other things to consider covering besides the home being below market value:
- How much are closing costs going to run you?
- How much is it going to be to maintain the property while renovating?
- The total cost of time and work
- Realtor fees
These are all important things to consider when you’re purchasing a property, and it can feel overwhelming, but there are strategies you can take advantage of.
Working with a realtor may help you find deals while working with wholesalers can help you find off-market deals. The biggest strategy you can adopt, however, is patience.
The first house you see might not work out immediately, but it’s important to remember that better deals are always available.
Once you’ve settled on a loan, property, and contractor, it’s time to start renovations!
If you’re able, performing a few renovations yourself (even if it’s simply painting walls or installing shelves) can save you money over the long run.
It’s important to remember, however, that this renovation shouldn’t take too long. Every day you have this property is a day that it’s accruing interest, taxes, utility costs, and other fees. Basically, it’s really easy to lose money on your properties.
The best thing to practice during renovations is efficiency. That’s why it’s important to decide upon your contractors carefully. If someone tells you they’ll be able to wrap up a project in a week, then you should be able to count on that happening.
It’s Time to Sell
If you’re not a realtor, it’s important to have someone you can rely on throughout the entire process. Hiring a realtor that understands the market, and the situation you’re in is crucial to selling the property you’ve flipped quickly.
It’s also the key to gaining the profit you’re seeking.
Ideally, you’ll have already gotten a property estimate for any renovations you originally planned on making. So, while you can trust this number and their estimate, it’s also important to remember that you are ultimately the one deciding on the property’s listing price.
It’s also important to note that you don’t have to immediately run out and get your realtor’s license to start flipping properties — especially not for your first house flip. In the long run, it might be a worthy investment, but to get started it’s worth paying 3 percent of your closing cost.
Once you’ve got a few house flips under your belt and you’ve decided it’s a career move you’d like to make, it can definitely be worth the time and money needed to get your realtor’s license.
Remember These Steps When You Flip a House
Now that you’ve learned how to flip a house, it’s time to put these steps into practice! Remember, though, you can research and take as long as you’d like, but the longer you hold on to any property you invest in, the more money you’re going to lose.
It’s important to have a plan and understand where things are going before you begin any renovations. This is going to help you gain the most money back from your renovation, and it’s almost going to guarantee you make a decent profit.
Ready to get started? Contact us today to learn more about a potential loan!