8 things you must know before flipping a house
MONEY + MATH.
As obvious as it sounds, you need money before you can flip a house not only for the purchase of the house but for other expenses. Make sure you can answer all of the below questions.
How are you paying for the house? Are you paying with cash? Are you getting a conventional mortgage or are you getting a bank loan? How much is the rehab budget? Do the math and make sure you understand the cost of the the property, loan payments, rehab, taxes, utilities (heat, water, etc.), travel fees, etc. Something always comes up, so put aside a small amount for miscellaneous items.
A GOOD AGENT.
Finding a good agent can be hard. There are many agents out there, so you have a lot to choose from. Once you have bought and sold a few houses to flip, you will figure out the difference between a good agent and a bad one.
I have found over the years one of the best ways to find a good agent is to ask my friends and family if they've used anyone that they would recommend. Word-of-mouth has always worked for me. And I have given my agents' number out to many many people in return. Another good resource is obviously websites. It’s always good to read reviews and see what other people think about the agent you're considering to hire. Always remember that the agent is supposed to work for you. Some agents have a knack of making you feel bad for wanting to look at lots of houses. If that's the case, maybe that is not the agent for you. There are plenty out there that will help you.
LOCAL MARKET KNOWLEDGE.
Before you go out and buy a house to flip, make sure you do your homework and understand the market where you are trying to purchase the house. It's great finding a cheap house, but are you going to get your return on investment. You know what they say … location, location, location! Do your homework and talk to your agent. Check out the comps in the area to determine if you're going to get enough money back at the end of the project. A great resource is having a conversation with the neighbors about the area.
CONTRACTOR, HANDYMAN, PLUMBER, ELECTRICIAN, PAINTER, ROOFER.
Well you know the saying it takes a village to raise a child. It takes a town to flip a house. Whether you're doing the work yourself or subcontracting it out, you are going to need a good team behind you. Make sure you find the right guys to do the job. A good mortgage lender, accountant and insurance agent must always be a part of your team.
Side note: when it comes to houses, you don't know what you're looking at. Always, always get the house inspected by a professional.
THINK ABOUT THE BUYER.
By now you've gone out and purchased a house to flip. You have done the math, you have a team behind you and you are ready to go. Now it's time to start designing your flip. Always remember that you are selling this house so try to imagine what type of people are going to buy the house.
If your house is in an upscale neighborhood, you are going to have to spend money on upscale finishes such as granite countertops and stainless steel appliances.
If you're not in such a high-end market, maybe Formica and cheaper appliances can be used. Sometimes it is hard to rein yourself in when it comes to the finishes, but remember at the end of the day, the more you spend, the less you make. That being said don't be cheap. Buyers know good quality finishes versus big box store junk.
PRICE THE HOUSES RIGHT.
Probably one of the hardest things house flippers have to determine is the sale price of the house. Whether you are a first time flipper or you have been doing this for years, setting the price on the property is very difficult. You want to make as much money as you can and sell the house fast. Do the math. How much did you spend on the property? How much did you spend on the rehab? Look at all the comparable houses in the area that have the same amount of bedrooms, bathrooms and square footage as your property. This will give you a good idea of what you can sell your house for. You don't want to shoot for the moon and have the house on the market for months at a time, but you also don't want to leave money on the table. Take your time. Listen to your agent. They probably know the market much better than you do. Remember you can always drop the price, but you can never raise the price.
THE THREE Os.
On budget. On time. On the plan.
Flipping a house is not for everybody. I know you see TV shows where they flip houses in half an hour and make tons of money. The reality is very different. It's a messy, painstaking process to take a house from rundown to nice. Take a long time to think about whether you really want to do this. Make sure you have enough time. If you decide to go ahead and flip a house, it can be very rewarding both financially and the satisfaction of taking an old house back to its original beauty.
Whatever you decide, keep coming back to MyFlippingHouses.com. We can help you every single step of the way. Good luck.