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5 Things to Consider Before You Start Flipping Houses
House flipping is all the rage these days, and it's easy to see why.
With low-interest rates, high demand for homes and tight inventory, there's great potential to buy a home and quickly resell it for a profit. Even so, buying a house isn't the kind of investment that should be taken lightly.
A quick glance at all the house flipping shows on TV proves just how popular the idea of flipping a house for profit has become. But a 30-minute TV segment misses a lot of important details, so if you're planning to make a killing in the flipping game, be sure to consider a few things first.
- Money is Made on the Buy, Not the Sell
It might sound counter-intuitive, but the price at which you purchase a house—not the price you sell it for—determines how much money you make on it. At least, that's a helpful way to look at it. Far too many inexperienced flippers buy homes for too much and are shocked to find that, after all the renovations have been made, it's impossible to resell at a profit. - Know What You Can't Afford to Fix
The key to flipping is buying a house that needs only cosmetic repairs. The home could need new carpets, new cabinetry, a fresh paint job, better fixtures and so on, but it has to be structurally sound. Homes that need a new roof, have a crack in the foundation or need a new plumbing or electrical system can be far too costly to renovate. And always have a full inspection done before you buy a house. - Don't Do Everything Yourself
Flipping a house is a team effort, so it's helpful to know a home inspector, accountant, lawyer, and especially a contractor. Hiring a contractor (or a team of subcontractors) to make the necessary repairs and renovations is essential not only for the expertise they provide but the speed at which they can work. Even if you have the construction know-how to do this work yourself, hiring a professional gets the job done quickly, and frees you up to focus on reselling this house and finding the next one. - Location Is Everything
Buying a house to flip can be a futile endeavor if the location or market isn't a good one. You need to locate areas where you can resell houses at a profit margin of at least 10% to 20% (although more than that is ideal). A real estate agent can help you identify good cities to flip houses in and find the best neighborhoods within each city. - Use a Real Estate Agent
A real estate agent is a great resource if you're just getting into flipping houses. But even if you've been at it for a while, a skilled agent can also help take your flipping business to the next level, giving you access to more homes on which you may be able to turn a profit.
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