Flipping Properties | The Do’s And Don’ts
To Learn How To Flip Properties, you must first learn the Do’s and Don’ts of the business.
In the last half decade, a great number of people have started to join the dynamic field of house flipping. House flipping has the potential be an incredibly profitable industry for new investors with a lot of ambition.
However, many new investors jump into a house flipping project without realizing the full gravity of the situation. They often make rookie mistakes that they’ll regret later. As a beginner, you should try to avoid these mistakes by researching and learning as much as you can about how to flip properties.
How To Flip Properties | The Do’s And Don’ts
If you want to learn how to flip properties, it would be smart to see what problems other just like you have run into. In the following section, we pair a common mistake (don’t) with its alternative solution (do):
Don’t Go In Blind
What many people believe starting out is that house flipping is something that can be learned in the moment, during each step of the process. These people believe that they can learn how to buy a house when negotiating a deal and can learn how to rehab when up to their ankles in plaster and drywall.
While some minute aspects are always learned in the moment, if you take your time too much, you may end up losing a great deal of money. Every day you sit on your property you are loosing money from the costs of homeowner’s insurance, utilities, maintenance, and any loans that may be involved.
Do Understand Everything Involved Before Buying A House
Always try to remember this important rule: doing your research in advance will save you money in the long run. You should determine the costs of each and every part of the house flipping process and make sure you stick to a lucrative business plan. If you aren’t going to make money during after you sell, what’s the point of flipping?
Don’t Just Look Up The ARV Online
One of the most valuable points that is emphasized when across the house flipping community is that you should never spend more than 70% of the ARV or “after repair value” when buying a property. While you might follow this rule by the book, it means almost nothing if your ARV estimate is incorrect.
What many people do is look up the ARV of other recently sold houses in their area online. While this is a good start, these prices might not be a reliable gauge. Maybe a comparable house on the same street sells for a certain amount so you assume that your house will be worth the same after renovations. Whoops! You accidentally overlooked the fact that the house you found on the Internet faced a lake and yours faces the freeway. If this were the case, your house would be worth considerably less.
Do Get An ARV Estimate From A More Reputable Source
Instead, you should make sure you seek out a professional in the field like a highly regarded real estate broker. Real estate agents have been around the block and know more precisely how much a house can sell for in a certain neighborhood, during a certain time of year, and in a certain market. After all, it’s their job.
Don’t Take On The Whole Project Yourself
If you’ve seen any house flipping reality show on television, then it might appear that two guys in construction boots with a lot of ambition and a couple sledgehammers can do a flip. In reality, doing it this way is incredibly difficult. Even if you are a skilled specialist like a plumber or an electrician, there are many more specialties that are needed to successfully complete a flip.
Do Build A Team
While hiring others might imply less profit for you, it will actually save you time and money in the long run. If you hire whole teams of subcontractors work on your property, you can finish the rehab, get the house on the market, and sell much quicker. In addition to subcontractors you might want to consider hiring an interior designer (especially for higher end properties). Finally, you’ll want to make sure you hire a good real estate agent, as mentioned before. The real estate agent can help you find and sell your property and can be an incredible asset during the process.
Don’t Spend Too Much Money
When you are renovating a home, you want to improve it so that it will be desirable to the potential buyers. However, this does not mean you should buy the most expensive appliances, fixtures and surfaces for your property. A house in a bad neighborhood is only going to sell so high, no matter if it has diamond studded doorknobs and gold plated toilets or not.
Don’t Be Cheap
Although you don’t want to go overspend, you shouldn’t go to the other extreme either. If you cut corners and buy the cheapest, flimsiest linoleum floors, or outdated, discount appliances, the potential buyers will know. This rule is even more important when selling a higher end home.
Do Stick To Your Budget
To avoid any confusion during the process, make sure you draw up a budget before starting to renovate. You might even consider getting quotes from local contractors and making a budget before you even buy the property. This way, everything is set into place. All you will have to do is make sure that your contractors don’t go over budget and that everything goes as planned.
I am considering the house flipping business. We have been doing some research and are in the process of developing a business plan/strategy, and we have much more to learn. Do you think we are in over our heads if we have no contractor or realty knowledge? Please advice.
Hi Kenny, You must gain knowledge and have the desire to succeed as in any business venture. Only you can answer that question when you are ready and that is the moment of truth when you say yes.