Apr 03, 2019
So, you’ve decided you’re finally ready to start making money investing in real estate. And you chose flipping houses as the greatest area for potential profits in your case. Some investors might prefer wholesaling, renting apartments or commercial property, or other aspects of the real estate niche. But you have chosen house flipping for your own personal reasons.
Are you new to the game? You may be wondering how to get started down the path to real estate flipping success. If you’ve never flipped a house before or only know the bare minimum, you’ll be happy to know that we’re going to tell you about the basics of flipping houses today.
When all is said and done, this basic information will help put you on the road to real estate prosperity. TV shows make it seem like it’s really easy to flip houses, but there is a lot more to it than that. So we’ll share the basics with you below.
Finding the right house
When you begin your flipping journey, the first thing you need to take into consideration is finding the right house to flip. Because without paying close attention to this crucial step, you could end up paying too much money for a house that you end up getting stuck with for a long time before you can feasibly sell it for a real profit.
As an example, the last thing you want to do is pay top dollar for a rundown house near market value. You’ll find yourself spending tens of thousands of dollars or more to fix it up, and then you’ll discover that you’re in a losing situation because the market isn’t willing to pay the amount you’re trying to sell your house for.
Location is also another important factor when looking for a house to flip. In some situations, location is going to be everything because finding a rundown inexpensive house in an up-and-coming neighborhood could mean the difference between an okay flip and a very profitable flip.
So, your first step is to find a house that needs work in a good area that people are interested in buying in. If you can discover a low-cost house in a great neighborhood, you have the potential for an excellent flipping investment opportunity on your hands.
Investing by the Numbers
Now that you’ve found an incredible potential property to flip, it’s time to buckle down and figure out the numbers. At this stage of the game, you need to get a rough estimate of how much you think it will cost to fix and you’ll also need to determine the going market value for properties of this type in the neighborhood.
So, in this example let’s say you’ve found an excellent 3/2 in an up-and-coming neighborhood for $100,000. After meeting with your contractors and going over the potential areas that need fixing, you’ve determined you’ll be able to fix up the house for $50,000.
Here’s where things get interesting. Now that you know you’ll be spending $150,000 to buy and fix the house, you have to determine how much you’ll be able to sell the house for. If the going rate in the neighborhood for houses of this type is $200,000, you’ll be able to turn a tidy profit after expenses, like somewhere in the neighborhood of $35,000-$40,000 depending on whether you use a real estate agent to sell it or not.
Do you see how this can get really exciting? In school our teachers always made math really boring for some reason. But when you’re doing the math that will ultimately tell you how profitable you can be, working on these figures can become a heck of a lot more fun!
Buying Your Investment
You’ve done the work to find a great house and you even looked at the numbers very closely and determined that this property would be an excellent flip. It seems like you’ve reached a conclusion and have determined that it’s time to buy this house as an investment property.
Remember, it’s always best to buy houses from homeowners that are about to face foreclosure. It may stink to be in the situation they find themselves in, but you can offer them a lifeline and help them get out of financial trouble and purchase a property at a low price at the same time.
There’s no guarantee that they are going to be grateful that you’re willing to pay for their property a lot less than what they originally bought it for. But you will be doing them a service nonetheless by helping them avoid foreclosure. So do not be afraid or hesitate to approach homeowners on the verge of foreclosure. Their life is very difficult at the moment but you’ll be offering them an olive branch whether you know it or not.
Renovating Your New Property
Renovations need to begin immediately if you intend to maximize your profits. You can either begin working on the renovations yourself if that was part of the plan, or you can start hiring contractors to get the job done.
Remember to always stick within your budget and never pay more for anything then you have to. That’s the only surefire way to guarantee that you make a healthy profit on your flipping investments.
Clearly, flipping houses is an excellent way to make a tidy profit as an investor. It’s also very easy after you’ve created a system to consistently find, renovate, and flip these properties. So if you’ve ever wanted to invest in real estate this way, we highly recommend getting started as soon as humanly possible, because the longer you wait, the less profit you’ll make over the long run.