Buying a cheap house, giving it a makeover and selling it at a profit is an exciting venture. However, as the folks at Instaoffer will tell you, it is not as simple as it looks. A ton of capital is needed when you flip houses, not to mention the hard work and the time. So if you are thinking of flipping houses for profit, you need to look at these aspects before you begin.
Zeroing in on the right property
Just because you see a rundown property which is being sold cheaply, it doesn’t necessarily mean you should sign on the dotted line. If you are desperate to begin, there are chances you will make the wrong decision. Think clearly, and check out all your options before you buy. Flipping houses is not as easy as what a television show will tell you, so tread carefully.
The price you buy at is as important as the price you sell at
Richard Levine, president of Greenbriar Lending LLC in Rockville says, ‘you should know exactly what the house will sell for when it’s fixed up, the cost of improving it [the permits], contingencies as well as your minimum profit so you can move on to the next deal. Once you have that worked out, only then can you know what to offer the seller.’
Location is vital
It really does not matter how sound your deal was when you made your purchase. If the location isn’t good, you will not be able to make a profit on your flip. According to Renovo’s Workman, even a profit margin of 10% to 20% can be considered to be successful. But when it comes to flipping, markets and locations are very important.
It’s best to check where the housing market is moving. Ask yourself if it is balanced or booming. For all you know it could be headed for a crash. You can find all the information you need with real estate agents in the area. It is best to keep yourself updated on the year-over-year trends on markets in your area.
The matter of valuation
When evaluating a potential deal, valuation is very important. Ask yourself what the selling price will be. A good real estate agent will be able to gauge the after-repair value of your property by doing a comparative market study based on your plans. While TV shows depict the investor fixing the house and then going to the estate agent, in real life investors don’t function this way. They make their offer to purchase the property based on what their selling price will be.
Repairs and renovation
Be sure to factor in the cost of renovating the property you have purchased. If you miscalculate, you may as well say goodbye to your profits. Check the property thoroughly and make a total of the cost of repairs before you make a commitment.
If you go about it the right way, flipping houses can not only be a lucrative proposition but an exciting adventure with a lot of creativity thrown in. The important point to remember however is not to be hasty and plan thoroughly before you begin.