Thereâ€™s much to learn for house flipping beginners especially about making a profit in their deals.
Contrary to what many people would have you think, house flipping is not easy. Reality TV shows on house flipping make it seem like itâ€™s easy but I can guarantee you that you cannot learn how to do it in a single day or by reading one blog.
The best way for house flipping beginners to learn the business is by doing it on their own. They will make mistakes along the way but experience is the best teacher.
Thankfully, you can shorten the learning curve by learning these six crucial profit making steps for house flipping beginners.
House Flipping Has Many Definitions
Before we get to the crucial steps, you first need to understand what house flipping is.
When people refer to house flipping, they immediately think of the process involved in purchasing distressed property from bank short sales or foreclosure and then quickly selling it without making much renovations. Itâ€™s a popular way ofÂ making a profit but it is not the kind of house flipping we are talking about here.
The traditional buy, rehab and flip style is also another form of house flipping. This type of house flipping adds real value to the buyer because you will have provided them with an excellent living space and this is where you make a real profit.
Some people confuse house flipping with wholesaling and I can see why. A wholesaler â€œflipsâ€ a contract to a real estate investor who then does what he wants with the property. I have used wholesalers to secure excellent deals and I still do.
None of the definitions describe what I think house flipping entails but we will get to that in a while.
6 Crucial Profit Making Steps For House Flipping Beginners
1. Take Stock Of Your Financial Resources
Do you need to find investors and how much of your money are you willing to invest? The first logical step is finding out how much money you need. If you can invest your own money to start flipping houses, the better it will be for you. If you donâ€™t have money, there are many ways that you can flip houses without money.
One great way to kick start your business is by splitting your first house flip profits with a partner willing to invest money.
2. Build Your Own House Flip Team
No matter how much experience you have, you wonâ€™t be able to do everything on your own. Putting together an efficient house flipping team is essential if you hope to find, fix and sell property.
Your team should include at least money lenders, accountant, insurance specialist, architect, contractors and real estate brokers. These professionals can help you make huge profits faster than you would have been able to do so, on your own.
3. Find A Good House To Flip
Finding a good house to flip is not easy. A real estate agent can help you find a good house to flip. You need to find houses that are not expensive to rehab or property that requires extensive repairs which will increase its equity. You can find these kinds of properties through wholesalers or real estate agents.
4. Make Sure The Numbers Work For You
You need to ensure that the numbers work for you by determining what its potential ARV will be when itâ€™s all fixed up. From this value, subtract your monthly carrying costs, repairs and purchase price. Whatâ€™s left will be your profit. If your calculations indicate that you will make a profit, you should consider purchasing the property.
5. Tightly Manage The Rehab
Once you buy the property, you have to manage the rehab rather than just relying on your contractor to do all the work. If the rehab is extensive, you can hire a professional contractor to oversee the rehabilitation. Supervise all the repairs to ensure they are being done properly and within your budget. A quick way of ensuring you do not make a profit is to let your contractor run free and allow your budget on the rehab to go overboard.
6. Race Against The Clock
The longer your house sits on the market, the less profit you will make. Soft costs such as town taxes, insurance payments, financing payments and other costs can really add up with time and can significantly reduce your profits.
We usually estimate six months from purchase to sale but we usually add in a few extra months to ensure we make a profit on every flip.
To Sum It All Up
Contrary to popular belief, a rapidly appreciating market is not a guarantee that your house flip will automatically be successful. You can still make a profit in a slow market. House flipping is immune to fluctuating marketing conditions because it is a short-term form of real estate investing.
House flipping is the least risky types of real estate investing. Provided you stick to the rules, you will make a profit.
If youâ€™ve made it this far, please leave a comment below. Iâ€™d love to know what you think about the six crucial profit making steps.