Many misconceptions about flipping homes successfully persist, thanks to numerous TV shows and home improvement blogs that are actually constructed by amateurs, as opposed to experts, on the subject. One of these misconceptions is how easy it is. When flipping homes, there are a lot of factors to take into account if profit is your priority. It is not a breeze, and being ignorant of how real estate flipping works while diving headlong into it can cause many issues for you later on.
You have to be aware that the possibilities aren't limitless. There is a benchmark profit you should expect when trying to renovate a home to sell, and factors you should consider include things like home deposits, insurance, mortgages, taxes, etc. Property flipping is no joke, and you'll need someone to guide you during the process if you want to be successful at it. Lucky for you, this article is an archetypal guide to the process, and we'd go through the basics and a few questions regarding the whole thing.
The Ultimate Guide to Property Flipping
There are different approaches to flipping, but some have proven to be successful across the board. Four of these are mentioned here:
- Focus on generic properties
This might sound ironic, but using properties with a certain level of uniqueness is counterproductive in the long run. It is nice to purchase such properties if you want to live in them, but they are ultimately bad choices for flipping. If you're wondering what constitutes uniqueness in a property, think of unconventional structures regarding architectural design and geographical location.
Such properties make the renovation process more tedious because they often require efforts in, time and money that other mainstream properties do not need. These properties also draw attention from a small market, which can lengthen the resale period. For successful flipping, it is wise to stay grounded.
- Do your numbers
Flipping houses successfully requires a lot of forethought, which is apt to ensure you make smart decisions ahead of time. This forethought comes in handy during the period before the home's initial purchase. During this period, it helps to project costs ahead of time and think about all expenses and investments that need to be made before one eventually sells off the house.
Aside from the obvious expenses, so much needs to be thought about; you also have to consider the total servicing price, the licensing, and the fact that income would essentially be tied down on the property for as long as the renovation goes on, etc. If all these factors have been calculated accordingly, and it turns out investments into the property would exceed the sale value after, the best thing to do is hop to the next property and leave it alone.
- Be strategic about the sale
Anybody can move from property to property and negotiate whatever they think would be the best deal for them. For intelligent investors, this is a fundamental sin; negotiation without strategy is a total waste of energy and money.
Instead of buying properties from whoever wants to sell, it makes sense to target people that need to make a spontaneous sale; it puts you in a much stronger position for negotiation. Compare a seller in this scenario to a seller who has no sense of urgency and all the time in the world for bargaining. You are bound to buy the property for a lesser price from the seller with a sense of urgency. And since you spent less on purchases, your profit is likely to be higher.
- Be knowledgeable about renovations and flipping
An ignorant property flipper is a doomed property flipper. Most people get into the process without thinking about what they have to do or might encounter.
If you enter the flipping process and you find that you are learning about most things you encounter for the first time, the chances are that you are not ready for it. Do not let the process shake you off. You should be able to harness the currents of flipping and use them to your advantage in various scenarios. You would also need to understand what the renovation process would entail; some people end up making the kind of renovations they would not be able to profit from.
Frequently Asked Questions on Property Flipping
These are questions asked by people who are new to property flipping or just starting to take it seriously. Everyone can learn from these.
- What exactly is property flipping?
Property flipping is simply the application of wits to real estate transactions. It requires strategy and positioning; it's essentially the purchasing of undervalued properties, the renovation of said properties to optimize and increase their value, and finally, the sale of the renovated property to earn you profit against your initial purchase and renovation prices.
- Is property flipping legal?
Yes, it is. Some people see it as a modified money-making scheme of dubious means, but it's really not.
- What is microflipping?
This is property flipping on a smaller scale. It foregoes the renovation phase and puts the purchased property back on the market shortly after purchase.
- How much profit can I make?
That largely depends on one factor: you and the decisions you make. You should project and do calculations before going through a flipping process.
- How long does the process take?
The entire flipping process is dependent on various elements. Such elements include microflipping, renovation period, market condition (state of real estate in general, location, availability of buyers), etc
- Should I rent out my properties rather than flip them?
This depends on you and the type of income that suits you. Flipping houses is a more immediate process than renting; you get to rake in profits as they come. Renting is playing the long game. You can get a steady income from tenants for years to come.
- How much money do I need to flip a house?
Since you are buying undervalued properties, this should work in your favour. That being said, the cost of flipping a house depends on the kind of house, the house's location, the money you would be required to spend on renovations, etc. Purchasing the home shouldn't be too hard; you can use the equity on your present properties as a deposit for the purchase.