House flipping has become one of the most popular real estate investment strategies over the past decade. As the world continues to develop, every corner of every land steadily increases its potential market value. Now all that’s well and good, but diving into the world of house flipping is no easy feat.
No matter how enticing and exciting it sounds, house flipping is not for the fainthearted. It needs hard work, and preparation is crucial. ATTOM Data Solutions recently released news about the decline of gross profits in home flipping across the U.S. this year. If you want to avoid being part of that statistic, avoiding common rookie mistakes is a must.
To become successful in house flipping, you must be prepared from the start. Luckily, we’ve got you covered. Here are the three things you must have before you start diving into the world of house flipping.
Information will always be the key to success. If you understand everything, then preparing would become easier. And with proper preparation, the possibility of failure decreases.
Do your homework. Look for the real estate target market that you want to deal with. The differences among genders, social status, race, lifestyles, and the ages of your market will be a big factor in how profitable your investment would be. Analyze what your target market wants and needs and look for the most suitable property that you could offer them. You can also do it the other way around.
When looking for the perfect property, the perfect balance between accessibility and serenity is one of the most important things to consider. The goal is to find a place close to the city and its benefits but still far enough not to be interrupted by the busy city life. The safety of the neighborhood is also a vital selling point.
As with any other business, having the capital is a must. However, the main thing separating a successful real estate business from all the other run-of-the-mill trades is how expensive and volatile the industry can be. Property acquisition will be brutal if you don’t have enough money to begin with. Loans’ interests increase exponentially, and the property’s market value might decrease the longer the project gets derailed.
Make sure you know all the options you have and could have financially. Looking for private lenders is better than getting loans from banks and lending companies.
Preparing at least $100,000 is an ideal start, but it’s still prone to many risks. Once you’ve done your market analysis, sticking to your budget should become a religion. One of the best ways to capitalize on the money you’ve prepared is to acquire home and land packages. Renovating is easier and cheaper than starting from scratch. Getting a property that’s been recently built is better since there would be fewer expenses in making it safe and habitable compare to buying worn-down houses.\
Speaking of safety, make sure to get property insurance to be safe from fire, theft, flood, or any other situation that might cause damage. Getting the property insured is an investment that might save you from further spending and might increase the value of the property.
The cost of marketing and selling the property itself can be quite expensive as well. It would be better to take advantage of the people’s need to always be online and market your property on social media instead of printed advertisements.
Lastly, make sure every expense is accounted for in your budget plan. The only way for the investment to succeed is if the sales price exceeds the combined costs of acquiring, holding, and renovating the property.
Flipping a house and selling it will take time. Finding the right property might already take several months. Then you’d have to negotiate for some time to buy it. Once you’ve acquired the property, weeks would be spent on the inspection. That is if the proper agencies are available during that time.
After that, the renovation will take months, depending on how big and worn out the property is. The construction and even the demolition will take at least half a year. And then back to inspections and processing. And once all is settled, you’ll have to wait longer to look for a client.
And putting together a team to work with you and for you is an entirely different story. Getting the right manpower with the skills you can count on and personalities you can trust will take time.
More than all the money you’re going to spend, time is the biggest investment you will have to give in a project like this. So, before you decide on anything, make sure you know what you’re getting into.