Articles and Advice
What to Consider Before You Begin House Flipping
With reduced inventory in the current market, there's great potential to buy a home and quickly resell it for a profit. But buying a house isn't an 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 many important details, so if you want to kill it in the flipping game, consider a few things first.
1. Money is Made on the Buy, Not the Sell
It might sound counter-intuitive, but the price 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. Many inexperienced flippers buy homes for far too much money and are shocked to find that reselling at a profit is impossible after the renovations are complete.
2. 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, cabinetry, a fresh paint job, better fixtures, and so on, but it has to be structurally sound. Homes that need a new roof, plumbing, or electrical system or have a crack in the foundation can be far too costly to renovate. Always have a full inspection before buying a house so you know exactly what needs fixing.
3. Don't Do Everything Yourself
Flipping a house is a team effort, so knowing a home inspector, accountant, lawyer, and especially a contractor is helpful. Hiring a contractor (or a team of subcontractors) to make the necessary repairs and renovations is essential. 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.
4. Location is Everything
Buying a house to flip can be futile if the location or market isn't good. 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.
5. 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 help take your flipping business to the next level, giving you access to more homes on which you can turn a profit.
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