Not gonna lie, HGTV flip shows are definitely a guilty pleasure of ours! There is nothing like the satisfaction of seeing an ugly caterpillar transform into a crisp, elegant butterfly of a house! Was that weird?
Well, daydreaming about flipping houses isn’t! It’s simple: you pick a house, buy it cheap, work on it tirelessly, take before & after pictures, and make a ton of money… right?
Part of that is true. However, it’s easy to forget that great rewards come with great risks. Slip up, and you could end up losing money on a house rather quickly. So, what really goes into flipping a house?
Um, money!
(Just a little more than what she has)
Because flips are higher risk, you will need an excellent credit score if you plan on using a lender. You will also want cash for the down payment. If you can buy the home out of pocket, it may make sense to take out a loan for the renovations, realtor fees, and closing costs. If you can finance everything out of pocket, please be my financial advisor!
Knowledge
It is vital to understand the current real estate market in your target area. Keep in mind the direction the market is heading. Is something that you buy now going to depreciate in value? Free tip: Might not be a good time to buy it! Location is key when you are choosing the ideal property. You want a house in a desirable neighborhood that will sell fast. Also, know what home improvements actually add value. Another free tip: Stay away from pools!!
Research
Please make sure you are looking for the best deal in all the right places. For example, take a look at auctions, short sales and foreclosures and confirm that you have explored the financing options for these types of properties.
Find the One 💘
This decision should be based on:
Location :: if you want to sell a house, make sure you are selling something that people want to buy. This means a desirable neighborhood or a good school district. It is better to buy the ugliest house in the best neighborhood than the best house in the worst neighborhood. Make sure that the only direction your house can go is up!
Condition :: unless you’re demolishing a house, you want something with sound structure. Find a place that has good bones. This will keep you focused on improving the property rather than keeping it from falling apart.
Repairs :: think about putting on lipstick versus plastic surgery. You want something that is easy to improve instead of spending precious time and money that you may not see a return on.
You :: make sure that the investment property is closer to where you live. How far do you want your commute to be? What do you want your hours to be? How much time and money can you commit to this project? Make sure to estimate high!
And of course, the Kitchen :: the kitchen is seriously one of the most important rooms in the house. How much do you have to spend to make it appealing to buyers? Some kitchens may be easier to fix, while others need a little more love. It is wise to budget this first, and adjust accordingly for the rest of the house.
You Bought, Flipped, and Sold the House… Now What?
Balance
It is important to create a balanced portfolio. This means thinking about what you do with all the money that (hopefully) comes in after your hard work. Do you plan on reinvesting it into your next project? Putting some into savings? Renting out a property? What are your life goals? Dig deep and come up with a plan.
Be on the Prowl, Like 24/7
It’s great to have a house to renovate, but what about the next one? If you want to make this a business, you must keep your mind on all aspects of it. Dedicate time to future projects to keep your momentum going!
Play Nice
Remember learning how to play well with others? All those hours learning to say “please,” “thank you,” and do NOT throw a tantrum. Well, it finally paid off! Now you can build healthy relationships with people that will make your life easier. Find vendors that you prefer and treat them well. The better you treat others, the more likely they are to help you out! Some key players to find are a realtor, contractor, lender, and attorney.
We laughed, we cried, and we learned. Hopefully this helps you get an idea of what real flipping is like. Are you ready to make the glamorous jump into the Flipper World? We have so much more knowledge to offer.
Signing off,
McCann Properties