House flipping is buying a house or property with the intent to sell it for a profit. Can you make money doing this? Yes. Can you make a lot of money doing this? Yes. But you can also lose everything you own if you make a bad decision. Here are the major areas of flipping houses you need to be aware of to make it work.
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Know the Local Real Estate Market Well
This is the first thing that you need to do is research in order to gain sufficient degree of knowledge about the local real estate market. You will be able to know a certain property is the truly a deal is if you know the market value of comparable homes in the area. It is recommended to get the real estate license. This will give two benefits: access to both asking and selling prices and make you aware of properties as soon as they come on the market to help you find real bargains.
Buy Property at Below the Prevailing Market
In the basic principle of making money from flipping homes, you must buy the property at deep discounts and should be taken seriously. The ultimate selling price of the property as its retail price, the price that you are paying should be seen as the wholesale price and the difference between the two must provide a sufficient profit, plus room to cover property renovations. Whenever purchase houses to flip always based rely the decision on entirely in the numbers, and you have to be absolutely relentless about this.
Rent Out the Property Profitably (if necessary)
Selling a flipped house takes some times. Sooner or later you will find yourself stuck with a difficult-to-sell property. The solution is renting it out until a suitable buyer can be found. In order to do that, you need to be certain that you can rent the property out profitably. This gets back to knowing the local real estate market, by having a thorough understanding of what comparable properties are renting for the area. It is worth to remember that, any property that you buy with the intention of flipping, should also be a suitable rental. The market rental of the property should be sufficient to cover the principal, interest, taxes and insurance on the house, and preferably a little bit extra to generate a profit.
Know the Cost of Typical Repairs
You need to be aware of the competition in the market, not only for the flipped property or houses, the competitor can be from even the new houses. In this sense, you need to equip yourself what repairs will be needed on the property, as well as a reasonable cost. If you do not have much experience in home remodelling and repair, what you can do is create a panel of experts whose knowledge base you can tap on short notice. No matter how good a deal is, you could lose money on it if the purchase price plus the cost of repairs exceeds the market value of the home.
Prepare for Plenty of Cash
This is no question about it because the material that you dealing with is a property plus you need also provide funds to repair it. Secondly, mortgage lenders typically don’t lend more than 80% of the value of a non-owner occupied property. Thus, you should be able to make a downpayment of at least 20% per property. It is worth to mention that 5% down at 3.5% down loans are available only for owner-occupants, not property flippers and investors. It’s unlikely that you’ll be able to get a home equity line of credit to make repairs on a non-owner-occupied property, so you have to pay the cost of repairs out of pocket. You also need to have extra money available in case there are unforeseen problems that need to be fixed.
So, basically yes, you can make money flipping houses. But there’s a lot more to it, and you’ll need to understand it all in order to make the promised riches.
