In simple terms, fix and flips, known as “house flipping” is a way of buying a property, renovating or repairing it, and then selling it at a profit. It is the fundamental niche of real estate investing, especially for beginners because they have low entrance barriers.
Flipping Houses has been on the rise across the nation. A house is considered flipped when it has been bought to quickly resell it. Often, the time between the purchase and the sale of the house flipping ranges from a couple of months—12 months to be more specific or a year.
Two Different Types of House Flipping
- A real estate investor purchases a property in which its value has the potential to increase given with its right repairs and updates. Upon completion of the work, the real estate investor makes money from selling the home at a higher price than what he or she purchased it for. This is called “fix and flip”.
- An investor purchases a property in a real estate market with rapidly rising home values, where he or she makes no updates. After holding the property for a targeted month, the real estate investor resells the property at a higher price and makes a profit from it.
Is House Flipping Profitable?
In reality, house flipping can be either a dream or a disaster. If it’s done the right way, house flipping can be a great way of investment and incredibly profitable. In a short period, you make smart repairs or renovations and sell the house or property for much more than you paid for it.
In the opposite direction, when house flipping is done the wrong way, it’ll turn into like a house flipping horror story—instead, we thought of a good deal, it turned into a house with a less impressive foundation and a leaking roof—in short, it results to unsatisfactory repairs or renovations.
If you’re going to reflect, house flipping may not make you money, instead, it could cost you thousands of dollars. Because you certainly want to reap the rewards when you invest, it is highly suggested that you consult an appraiser to assess the value that you would cost.
Five Smart Simple Steps
- Finance House Flipping Using Cash – Adding debt to your investment could take you to higher chances of losing money if there’s a change in your plans. Ideally, it is recommended that you flip a house with cash because it has no interest fees compared to when you borrow money. Also, when you use cash for house flipping, there’s no rush to sell because you can wait out slow in the market, as it doesn’t have interest payment piling up against it each day it doesn’t sell. Most importantly, there’s no debt to hold you back when using cash for house flipping because it saves you from a lot of risks—given that putting more money than you invested in it is already a risk.
- You Have to Know the Market – Oftentimes, you can ignore the less valued side of the business when you’re thrilled to do your next project. To make sure you understand the market that makes for a successful house flipping, you are encouraged to find a real estate agent with years of experience in your neighborhood, as she or he can help you target your home search to the right neighborhoods based on your preferred budget for renovations, price point, and desired profit.
Because if you don’t have a better understanding of the market and the real estate trends, 1. You wouldn’t know if you’re getting a good deal on the house you’re buying. 2. You can’t accurately identify the potential value of the home. 3. And you don’t know how to price the house so it is recommended to consult an experienced real estate agent.
- Create a Budget for House Flipping – It is better to spot problems on the front end than be surprised later on. You have to know your price range when purchasing a home, the cost for its repairs, completing a renovation project, and paying the selling cost.
A good way to budget is to list any cosmetic or aesthetic projects, such as expensive overhauls like electrical or plumbing, so you can properly set aside the amount of money it will cost. Contacting a contractor is also encouraged when you don’t have a background in construction, because it can tell you what needs to be fixed and how much it will cost. And if you’re under contract, it is highly suggested to get a home inspection and other specific inspections you may need.
- Smart Renovations, Smart Investment – It’s important to know your budget upfront and make sure your updates stay on track which could boost the value of the home. Big renovations, such as the kitchen or bathroom can make or break a flip—for example, according to 2020 Cost vs. Value, the average amount spent on a major remodeling is almost higher than the regained of the cost itself. That’s not the kind of ROI you want to achieve when you’re house-flipping.
While you’re investing in a couple of big updates on a flip, small tweaks can help you invest smartly, such as a fresh coat of paint, updated hardware, and new landscaping which can make a huge impact.
- Guidance from a Local Expert – You can make money in house flipping if it’s done the right way. If you’re able to flip using cash and stay within your budget for renovations, it’s completely possible to create a great return on your investment. The primary key to house flipping is successfully doing it with cash. Create a smart investment in the type of house you purchase, list down your preferred renovations in your budget, and sell it quickly. That is why consulting with an experienced real estate agent helps you make it all happen!
A Final Thought on House Flipping
If you’re ready to flip houses, ensure that you consult a trusted local real estate expert. House flipping is a big risk, even when it’s a basic niche in the real estate market—you have to make sure you’re firm with your decisions and be prepared to break even. Because investing costs a lot of hard work, money, time, and trust.
REFERENCES:
https://wealthfit.com/articles/fix-flip/
https://www.sharestates.com/glossary/fix-and-flip/
https://www.ramseysolutions.com/real-estate/how-to-flip-a-house
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