Flipping properties is where real estate investors buy houses, often through auctions, fix them up and turn around and resell them down the road for profits. Is there money in this? Absolutely, however one bad decision can result in you losing everything.
Many investors are misled by real estate television advertisements that promise large returns on every deal. What they leave out, however, are all the other costs such as real estate commissions, closing costs, insurance, taxes, miscellaneous property maintenance and utilities which come with each transaction. In reality, the actual net profit you get from flipping properties is much less. To help with this, there are some considerations to take before flipping your first house.
Target Quick Selling Homes
When looking for a property to flip, ensure you are buying one that has a good chance of quickly reselling. You’ll want to buy property in areas that have good schools, good reputations, low crime rates and other features. The house you buy should be in a resell price range that will attract a large number of prospective buyers. For instance, if you are trying to flip a really cheap property, you might not find too many people in the area who have qualifying credit scores for them to get a loan.
Likewise, if you buy an expensive house to flip and resell, it might take a bit longer to sell since fewer people will be able to afford to buy it. You should aim for a price range in the area that is somewhere in the middle of the two.
Gather up a Team of Professionals
Successful house flippers realize their strengths and are not afraid to tap into professionals, particularly technical workers like electricians and plumbers. Novice flippers often have an understanding of the cosmetic side of flipping, but are hit or miss on the fundamental structural components like roofing. A good example would be buying a house in Denver that has a flat roof; it snows often there. Things like having the sewer line should be checked out by experts prior to buying the property since they can be expensive to fix.
Keep it Simple
On average, bigger renovations can result in net money losers. They shouldn’t be counted on for your profits unless of course you are renovating to bring the property up to the neighborhood minimum standards or are trying to make the house livable. Factor in all renovation costs before making an offer to the seller.
Consider Private Lenders
Private money lenders offer real estate investors financing based on assets and qualified collateral. They can typically provide loans in just a few days. These types of lenders work with investors, who buy houses, improve or repair them and then resell the homes for profit. When working with these types of lenders there are generally fewer hoops to jump through and easier qualifications to meet. Often, when you work with private lenders, you are able to get financing for additional costs associated with your deal, such as the renovations that you are planning.
For your home flipping to be successful, there is a bit more you should do than simply slapping some paint on the home and mowing the lawn. You need to hire experts to help in areas you are weak in. You need to make the curb appeal of the home attractive. You need to estimate accurately and keep costs down. You need to understand what buyers are looking for in the area you are reselling; a good school district, wooded acres, upscale shopping, etc.
There is unlimited potential in flipping properties; however it takes time, patience and money. Opportunities will continue to present themselves as long as you are making wise decisions in the process. For more information on obtaining a loan through a private lender, please contact us here at Central Street Lending where we work with your unique financing needs.
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