The Do’s and Don’ts of Flipping a House
Are you thinking about getting into the business of fixing and flipping houses? Here are all of the major do’s and don’ts of flipping a house.
Any experienced house flipper knows that there are a lot of flipping mistakes that can be made. However, if you are new to house flipping, you may not know the right way to flip a house. It’s easy to make rookie mistakes when you’re first starting out, and you can end up losing a lot of money.
How can you avoid making flipping mistakes as an amateur house flipper?
When it comes to flipping a house, there are certain rules that you must follow. Here are some do’s and don’ts to flipping homes to help you get started!
Do: Study Your Finances
A lot of people enjoy flipping homes in order to make some extra money. However, if you aren’t cautious with your finances, you may end up spending more money than you can make.
Before you flip a house, take a long, hard look at your finances. Consider exactly how much money you can put towards fixing and flipping a home. This will help you understand what homes you won’t be able to flip.
You should also try to buffer your budget when choosing a home to flip. You may run into unexpected issues while you flip a house; that extra money you set off to the side could be the difference between a success and a major loss!
If you have any concerns about financing, there are many fix and flip loans available to you. Utilizing these loans can be helpful as you begin flipping homes!
Do: Pay Attention to Your Competition
You should take the time to study other flippers in your area. Watching your competitors can give you ideas on how to flip homes; you can also use your competitors’ techniques and improve them to give yourself an advantage. Your goal is to set yourself apart from competitors as much as possible!
Don’t: Blow Your Budget
It’s easy to get carried away with expenses when you are purchasing a home to flip. You may be tempted to overbid so that you can beat competitors out of a home. However, overpaying for a home you intend to flip is a huge flipping mistake!
No matter how good you think a home will sell after it’s flipped, you can’t blow your budget on the cost of the home itself. You need to save plenty of money on the repairs and renovations you’ll use to actually flip the house.
Make use of home analytics tools before you enter into a purchase. They are designed to show the approximate value of various homes; these analytics will prove invaluable as you decide what a home is worth. If you base your purchase on its after-repair value, you are going to lose out on a lot of money!
Do: Look Into the Neighborhood
The homes you flip will still only look as good to potential buyers as the houses surrounding them. It’s important that you look into the surrounding neighborhood of any home you want to flip.
Some of the best homes to flip come from up-and-coming neighborhoods with a few old homes in them. People are bound to want to purchase a recently renovated home in a respectable neighborhood! No matter how well you flip a house, if the rest of the neighborhood looks rough around the edges, you’ll struggle to make a sale.
Do: Be Realistic When Selling a Flipped Home
Just as you don’t want to overpay for a home to flip, don’t overprice your home when you’re selling it! You need to be realistic about the value of the home once you’ve repaired it. No matter how much money you’ve spent on renovations, only the value of the home itself matters, not the cost of repairs.
The best way to determine the value of a flipped home is to contact a professional for an appraisal. This can be a home flipping expert or a real estate agent. They will know how to evaluate your home and determine a good price for it.
Don’t: Ignore the Home’s Exterior
As a house flipper, you are bound to spend a lot of time repairing the inside of the home. However, a big mistake you can make is ignoring the home’s exterior.
Whether the home has a garden that has been left to rot or a fence that needs repairs, you can’t ignore the outside of your home. After all, this is the first thing potential buyers will see! You need to make sure that the exterior of your home leaves a good impression on those who see it.
Do: Understand the 70% Rule
The 70% rule is a common rule that many expert house flippers follow. In essence, the 70% rule dictates how much money you should spend on a home before flipping it.
Consider all of the repairs you will need to make on a home and determine the value of the post-repair house. The money you spend purchasing and repairing the home should not exceed 70% of the estimated value after you’ve finished repairs. To avoid overspending on a home, take these ideas into consideration before making a big purchase!
Do: Seek Out Undesirable Homes
When it comes to flipping a house, you shouldn’t look into beautiful homes that could sell easily. Instead, you should keep an eye out for homes with ugly paint jobs, poor roofing, and other minor issues. If a home is seen as undesirable, it’s the perfect candidate for a house flipper!
When inspecting a home, the most important qualities are a solid foundation and structure. Unstable houses are harder to fix and sell for a profit. However, homes that are seen as ugly and undesirable can easily be fixed and sold for a relatively high price.
To make sure that the homes you’re selecting are good candidates for flipping, bringing an appraiser or experienced tradesman along with you when you inspect the home can help. They can point out any serious damage the home has that may make renovations more difficult. Always inspect the homes thoroughly to make sure that they are in decent condition.
Don’t: Stick to Only One Source for Homes
Searching for the perfect home to flip can be a hassle. That’s why you should broaden your search by using different home buying platforms.
This is especially true if you are used to using sites with competitive markets. The moment a good deal shows up on high-end home buying sites, someone else will have likely scooped it up. It’s better to take your search to more obscure websites and locations.
Home auctions in person and online can be a great source for potential homes to flip. These homes are often on auction due to foreclosures and similar issues, which means that they are cheap and easy to fix. Join email lists for home auctions to better your chances of finding a good deal.
Do: Have Your Team Prepared Before Buying
Make sure that you have a team of experts put together before you even consider purchasing a home. You’ll need quite a few people to get the job done; lenders, contractors, and real estate agents will be crucial in helping you fix and flip a home.
Lenders will help you finance your home purchase with loans. You should prep them with information about potential purchases the moment they arrive. That way, you can get the money for your purchase faster.
Contractors are vital to helping you with general home repairs. From painting the walls to repairing leaky pipes, you’ll need all sorts of contractors at the ready to help you work!
Finally, real estate agents can help you when it comes time to actually sell your finished home. They can make the sales process fast, easy, and help you make a good profit from your hard work.
Do: Have an Exit Strategy
You aren’t always going to be able to get a good deal on a home. Whether the seller is charging too much for the home upfront or you run into unexpected expenses while flipping a home, you need to have a plan in place if you need to abandon the flip.
Understand that you may have to sell off your home at a loss if the flip doesn’t go according to plan. It’s better to sell a home at a low value than to hold onto a worthless venture. Try to have two exit plans ready in case the flip doesn’t pan out.
Your Expert Tips on Flipping a House
Now that you have some advice on how to flip a house, you’re ready to start your new career! Remember to always think critically when flipping a house to get the best return for your time and efforts.
Are you looking for great home flipping loans to help you get started?
We’re here to help. Contact us with any questions or concerns you have about our fix and flip loans and continue reading our blog for more helpful tips today!