TV shows about flipping houses usually make it look like easy money buy a home, hire a crew to fix it up, and make $20,000 when you sell it a month later. Like many things on television, making money through house flipping is much more difficult when you actually try to do it yourself. However, with the right strategy, you have a much better shot of making profitable deals.
Get a Trustworthy Contractor
Having a contractor you can trust is the most important factor in the success of your house flipping business. You need a contractor who provides accurate estimates regarding jobs in terms of both cost and time. A job that costs $30,000 and takes six weeks when you thought it would cost $15,000 and take three weeks can wipe out your profit margin and result in wasted time on a house that doesn’t make you any money.
Run the Numbers
Once you know the cost of renovations on a house, you need to calculate the amount required to make a suitable profit and determine if that’s a realistic sale price. This helps you determine how much you can afford to spend on the house. Double- and triple-check your math here; house flipping is far riskier than other flipping businesses because of how much money you’re putting into the endeavour. A single mistake can put you in a significant amount of debt. Don’t forget to factor taxes into your potential profits.
Research the Neighbourhood
Make sure you check out the neighbourhood before you purchase a house there. The ideal neighbourhood is on the rise, with houses in high demand. If it’s an area with quite a few homes on the market already, you could have a much more difficult time selling the one you buy. With neighbourhood research, you can also figure out the target market for the home you’re buying and plan your renovations accordingly. If the area is full of families, your house needs a large, open kitchen and family room to appeal to that type of buyer. For neighbourhoods with a large population of senior citizens, you should widen any tight spaces, such as hallways and stairwells.
Price It Right
After putting your time and money into a house, it’s hard to remain unbiased when pricing it. This is where your neighbourhood research comes in handy. By evaluating the sale prices of other homes in the neighbourhood, you can figure out the area’s price point. Stick to that range, and adjust as necessary if you aren’t getting any offers. It’s better to make the sale quickly so you can get your money and find another house to flip. Flipping houses is a huge financial commitment, so you should spend the bulk of your time on research to minimize risk. For the best results, you need to approach it like any other investment make your decision based on the numbers, and leave emotions out of the equation.