House flipping has become a much talked about subject, especially now there a numerous different television programs that show us exactly how to do it. However, if flipping was as easy as finding a house online, purchasing it, and then selling it for a profit, many people would already be property billionaires. There is a lot that goes into flipping a house in order to make a profit. It’s essential for you to research and educate yourself before you even think about looking for a property. Whether you start with a flat, think about buying resale HDB, or buy a run-down cheap house for next to nothing, there is certainly a lot of considerations you need to make.
Let’s have a look at some of the things you need to know:
Research Your Market
The first thing you need to do is research your local real estate market. What type of property is popular at the moment? What neighborhoods are sought after? The most important thing to remember is that you want the property to sell fast.
Understand The Finance Options
You then need to research all your finance options. Are you buying the property cash? Are you going to apply for a mortgage? Or look for a loan? You need to makes sure you understand the in’s and out’s of any finance you are thinking about using.
Use The 70% Rule
When flipping, you need to think about how much you can afford and how much you are able to lose on any deals. Most successful house flippers will use the 70% rule as their guidance when thinking about how much they are willing to pay for a property. The rule is you should never pay more than 70% of the after repair value minus the costs of the actual repairs. This is definitely a good rule to follow when you are looking for your first project.
Learn How To Negotiate
Obviously the less you invest in a property the better, this means the earning potential is greater. Having good negotiation skills can help you to get better deals on the initial price, the repair costs from contractors, and also gain a higher asking price when reselling.
Analyze How Much The Average Project Will Cost
If your thinking about flipping your first home, it’s a good idea to research how much it averagely costs to repair different property sizes. Think about looking at things like plastering, damp repair, laying carpets, rewiring, and installing central heating. You should also learn about the types of projects that are going to add the most value and then focus on these projects first.
Look For A Mentor
If you already know someone who is a successful house flipper, ask them if they are willing to mentor you. YOu could even offer them a little incentive for being your mentor, maybe a cut of the profit for working with you on your first project?
Do Your Research On Where To Buy
One of the best things you can do id research where to buy your properties in areas such as foreclosure websites. You may even find these types of listing in your local agents or in local papers. Don’t forget to keep your eye out when driving around too! Another way to find foreclosures is also through your bank because they are often the ones who are selling to reclaim unpaid mortgage fees.
Make An Offer
Once you’ve found a house that you like, it’s time to think about making an offer, However, you have to think about the fact that if a house is at a low price you might have a little bit or a lot of competition. Don’t be afraid to beat the competition by knocking on doors and directly offering a price. Before you make any sort of an offer remember to review your predictions and profit/loss indicators, this way you will stop yourself from paying and spending more than you should.
Find Reliable Contractors
If you’re a dab hand at DIY you might be able to complete a lot of the work yourself, but you might also opt to use contractors. If you do the work yourself you can guarantee you’re going to save yourself some money, however, if you have a big project that includes things like replastering the entire property, the help of a contractor is almost essential. If you find reliable contractors you are going to avoid any costly mistakes in the future. Try to build your own portfolio of a contractor that you like to work with, think about noting things like their arrival time, completion times, prices, quality of work, and organizational skills. If you find contractors that you like working with and know produce good work then you might be able to strike up a good deal, especially if you are going to have regular work for them.
You should always keep in mind that most flippers want to have a home bought, renovated, and sold within 90 days, so having a contractor that can work to this is going to give you the best results. Sometimes doing the work yourself can make a project timing longer too, so bear this in mind if you want a quick turnaround.
Relist And Sell
The majority of flippers will list their property with a realtor, this is because they have immediate access to buyers and list your property in so many different locations and using different methods. They also have the best knowledge when it comes to price fluctuations, the current market, and getting you the best price. You can choose to sell your property yourself, you’ll definitely save on realtor fees but you might end up waiting longer for the sale.
There is no denying that house flipping can be an extremely risky business. However, if you play it smart you can make a lot of money flipping. You can, however, lose everything from just one bad flip, which is less than ideal.
Before you think about buying a property to flip you need to make sure you are completing the right research, following the guide above should help you on the path to becoming a successful flipper. Have you flipped any houses? What was your experience like? Was there anything you would have done differently?