If you’re considering flipping your first house, you’ve come to the right place! In this ultimate guide, we’ll go over the basics of flipping a house to sell. There’s more to it than just buying, giving the place good paint, and selling it. You’ll need to come up with a budget, finance your project, find the right property, and have the right team behind you.
The first rule when flipping a house is to have a plan. You should be able to map out the whole process from the beginning to the end before you choose to invest in a house. You’ll need to do research; speak with experts; practice skills in plumbing, carpentry, design, negotiating; and so on. Then you’ll want to practice them all again!
To provide you with a better idea of how it all comes together, there are a few steps you should be taking when flipping any home. Here’s a brief guide to the steps you’ll be taking, not just for your first house flip but for every house flip you’ll do after
Step 1. Set a budget
Besides knowing when to move quickly, setting a budget and strictly sticking to it is the most crucial step for house flipping. You need to get the funds and make sure every choice you make at each stage of the process keeps within your budget. Sticking to your budget will help in your project turning over a profit when it’s sold and can ensure you won’t have to dip into your personal funds to fill in the gaps.
A great way to set your budget is to try and make between 10%–20% in profit when you sell the house. In your research, you’ll want to see how much the best homes in the neighborhood sell for to help determine your budget.
Step 2. Secure needed funds
There are different ways you can finance your house flip. Most will seek out a loan—whether a hard money loan, a conventional loan or a personal loan. Some also utilize crowdfunding platforms to come up with the money needed. This works as a place where individuals and/or institutions collectively finance loans. Each lender becomes a sort of investor who provides a small percentage of the borrower’s loan and earns interest on that money.
Step 3: Find a house
You need to find a house that you feel is fixable and still within your budget. The most heard advice on this and the truest is to find the least expensive house in the most expensive neighborhood. It’s a great idea to consider whether the neighborhood is near great school districts, ease of commute to surrounding cities, plus the area’s crime and age demographics. In a desirable neighborhood, your house will be more likely to sell for more—and quickly, at that.
To fund purchase of the house, you may want to consider real estate crowdfunding. First, learn as much as you can about the concept. Explore the real estate crowdfunding pros and cons to determine if it’s the right course for you. Ideally, you want to be able to invest in the house you’re flipping in the best way possible so you can maximize profits and ROI at the project’s conclusion.
Another thing to consider is to look for a house that only needs cosmetic fixes and updates such as painted cabinets, new countertops, new floors, landscaping, or painted walls. New paint in any home does wonders and is known to be one of the highest returns on investments made possible by a home improvement. The typical gross house flipping profit in 2019 was USD$66,300, but to achieve this, you need to make the necessary repairs and stick to your budget. (1)
Step 4: Plan all the changes and updates
Now that you’ve set your budget, obtained your finances, and picked your house to flip, it’s time to start coming up with design ideas and figuring out the logistics of flipping your prospective house.
If you’ve got a flair for design and the changes are merely cosmetic, you can do the plans yourself. But if you’re unsure and don’t know where to begin, you can consult architectural design services, contractors, interior designers, or even a structural design consultancy for more major changes in your house’s structure or foundation.
Step 5: Begin renovating and redesigning
With your plan now in hand, it’s time to begin! Unless you and your family are all experienced carpenters, plumbers, and electricians, hiring some construction crew might be a good idea. Not only will you need these professionals, but you’ll also need a contractor or have the ability to supervise and work as the contractor.
Other things to consider are a demolition (though this could only cover bigger jobs) and a waste disposal team. Once everything has been cleared out—whether you’ve taken down the walls, old cabinets, or old carpets—construction can then begin. Make sure your team are all on the same page and are working together to flip your house. You can’t have a situation where your electrician hits a water pipe or your carpenter putting the kitchen counter in the wrong place to where the plumbing is. Communication is key.
It’s important to remember that a house flip takes time, though. In 2019, the average amount of days was 178 until project completion. And selling your flipped house could take even more time. (2)
Step 6: Stage the house and place it on the market
With all the repairs done, it’s time to sell! But it’s not just as simple as placing the house on the market; you have to stage the property in order to sell it. Staging is simply bringing in furniture and other items to show a buyer what the place could look like as a home.
Choose items that make the home feel inviting and as though it’s being lived in. This helps potential buyers to see themselves living there. According to the National Association of Realtors, 83% of buyers surveyed said they felt they could see themselves living in a home more easily when it was staged. (3)
Work closely with your realtor to ensure your intended set price is still achievable. Also, make sure that they are advertising the house properly to bring in as many potential buyers as possible.
Time to flip!
Flipping a house is a big project to undertake, especially if you’ve never done it before. Hopefully, this guide has given you the proper insight into your budget, financing options, and the amount of effort and manpower it takes to flips a house.