Flipping
Top 30 Apps And Startups To Get Inspired
Make Sure You Have Enough Cash
You generally need about 25% of a house’s value for a down payment. While you won’t know the exact amount until you find a property, having some cash on hand is necessary to get started. Multiply your current savings by four to determine your price range and see if it’s enough for a flippable property in your area.
Get a Rough Idea of Common Repairs and Expenses
If you’re new to house flipping, research common expenses and repair costs. Talk to local contractors about flooring, professional inspections, tiling, etc. Experienced flippers are familiar with these numbers, which helps them estimate renovation costs quickly.
Start Talking with Potential Buyers
Begin building your network now. Talk to local real estate agents, scan social media groups, and visit open houses. Seasoned flippers sometimes line up a buyer before starting repairs. You may not get that far initially, but having a network of potential buyers can significantly shorten holding time.
Go Where the Discounted Properties Are
Avoid traditional real estate listings meant for livable homes at market value. Instead, focus on:
- Wholesalers
- Foreclosure listings
- Local auctions
Consider joining email lists to stay informed about new opportunities. Experienced flippers also market their services directly to sellers for unique deals.
Get a Professional Inspection
Don’t skimp on professional inspections. Every experienced flipper has a horror story about unforeseen problems that ate into profits. Inspections help avoid costly surprises.
Learn the Neighborhood
Ensure the neighborhood suits your target audience. For example, don’t renovate for families unless the neighborhood is family-friendly. Research online, talk to local agents, and visit the area at different times to get a feel for it.
Make Sure It’s in the Right Condition
Not every fixer-upper is suitable for a flip. Avoid homes needing extensive or complicated work, like outdated HVAC systems, serious roof repairs, or foundational issues. Look for homes that need cosmetic updates you can handle, like fresh paint and new flooring.
Hire Contractors You Can Trust
Even if you plan to do most repairs yourself, you’ll need professional help sometimes. Start building a network of reliable contractors before making an offer. Ask for referrals, research online, and talk to local professionals to find trustworthy contractors.
Run the Numbers
Before making an offer, calculate all costs, including:
- Purchase price
- Estimated repair and landscaping costs (add a buffer)
- Real estate fees, closing costs, and insurance
- Utilities and maintenance during ownership
Use the 70% rule: pay the after repair value (ARV) minus repair costs. For example, if the ARV is $200,000 and repairs are $30,000, you should pay about $110,000 ($200,000 x 70% – $30,000).
Play Hardball
Negotiate like a pro. Offer low and negotiate up, but never pay more than the property is worth. Be prepared to walk away from opportunities that don’t meet your financial criteria.
Stay in Your Comfort Zone
For your first few flips, avoid going overboard. Start with small, manageable projects in good neighborhoods. Bigger projects mean greater risk. You can take on more complicated projects as you gain experience.
Know Which Improvements to Make
Focus on necessary repairs and upcoming trends. Vital repairs are essential for selling, while modern trends can make your flip stand out. Research trends in security, smart home systems, HVAC, and appliances to add value without overdoing it.
Don’t Go Overboard
Keep your target audience and budget in mind. Elaborate details can quickly add up and push the ARV out of your target buyer’s price range. Stick to essential updates.
Call a Professional When You Need Help
Know your limits. Simple updates like painting and carpeting can be DIY projects, but for complex repairs, hire professionals. It’s cheaper to get it done right the first time.
Don’t Pay for Work Before It’s Done
Never pay the full price upfront for repairs. Deposits are sometimes necessary, but full payment should only be made after the work is completed to your satisfaction.
Finish on Time
Stick to your budget and schedule. Aim to complete renovations in two to three months. Delays increase holding costs and risk market changes that affect your ARV.
Get a Real Estate Agent
A real estate agent can help sell the house quickly and efficiently. Their knowledge of local markets, buyers, and comparable sales is invaluable.
Don’t Neglect Curb Appeal
First impressions matter. Ensure the exterior and landscaping make a great impression. Drive by the property and approach it as if seeing it for the first time. Make sure it stands out positively.
Price the House Realistically
Base the price on market value, not emotions or effort. Research comparable sales and adjust for your updates, but don’t overprice. An unrealistic price can prolong the sale and increase holding costs.
Make Sure There’s a Plan B
Have a backup plan for every major step. Know your options if a contractor fails, an inspector misses a problem, or the house doesn’t sell. Consider rental or owner financing options as alternatives.
Don’t Quit Your Day Job
Wait until you have a few successful flips before quitting your regular job. Balancing a job and house flipping is tough, but it’s safer than relying solely on flipping income initially.
8 House Flipping Mistakes to Avoid at All Costs
Neglecting to Inspect and Assess Before Investing
Purchasing a house without thoroughly assessing its location and conducting a professional inspection can lead to significant problems. A house might look great on paper but being situated near train tracks, a sewage treatment plant, or a slaughterhouse can deter buyers due to noise and smells. An inspection helps identify major issues like a crumbling foundation or failing plumbing system, which can save you from unexpected expenses during renovations.
Failing to Keep Track of Your Carrying Costs
Home renovation shows often present unrealistic timelines. Be prepared to carry the costs of taxes, insurance, utilities, and miscellaneous fees like HOA charges until you can sell the home. It usually takes several months to purchase, renovate, and sell. Pricing the home too high can extend this period, increasing carrying costs. Research and consult a real estate agent to set a realistic selling price.
Estimating Your Budget as You Go
The main goal of flipping houses is to make a profit. Without a detailed budget, you risk spending more than you make. Write down all expected costs and use these numbers to stay on track. Avoid the temptation to splurge on costly materials that can blow your budget.
Over-Improving the Property
Consider the neighborhood when planning updates. Over-the-top additions in an aging neighborhood can lead to losses because potential buyers also assess the neighborhood. High-end features like radiant flooring, marble showers, or a saltwater pool may not yield a large return if the surrounding area is inexpensive. Aim for improvements comparable to top-selling homes in the area.
Trying to Complete the Flip Without an Experienced Team
Flipping a home solo can be a big mistake. While DIY projects can cut costs, balancing your timeline with your budget is crucial since you’re still carrying the home’s costs. Certain renovations, like electrical and plumbing work, must be completed by licensed professionals for safety and permits. Check local regulations to determine which upgrades require licensed contractors.
Ignoring the Yard
Curb appeal is crucial as it creates the first impression. Before potential buyers see interior upgrades, they judge the exterior. Maintain the yard by cutting the lawn, raking leaves, trimming hedges, and keeping pathways clear. In warmer months, consider hiring a landscaper to enhance the yard with flowers and neat landscaping.
Working Without Permits
Skipping permits when required can lead to fines or forced removal of renovations. Consult your local permit office to apply for necessary permits or hire licensed contractors who can manage the permit process. This ensures your renovations are legal and up to code.
Overlooking Cosmetic Fixes
While major repairs like fixing a cracked foundation or replacing aluminum wiring are crucial, small cosmetic fixes also matter. Potential buyers notice things like scratched paint, chipped light switch plates, and dented door knobs. Address both major infrastructure repairs and minor cosmetic updates to increase the home’s value and appeal.
How To Flip Properties: The Do’s and Don’ts
Learning to flip properties successfully involves understanding common mistakes and how to avoid them. Here are some essential do’s and don’ts to guide you:
Don’t Go In Blind
Many novice flippers believe they can learn each step of the process as they go. However, this approach can lead to significant financial losses. Every day you hold onto a property, you're losing money on insurance, utilities, maintenance, and any loans.
Do Understand Everything Involved Before Buying a House
Conduct thorough research before purchasing a property. Determine the costs of every part of the flipping process and stick to a lucrative business plan. If the numbers don't add up to a profit after selling, it’s not worth the investment.
Don’t Just Look Up the ARV Online
The 70% ARV (After Repair Value) rule is critical in house flipping. However, relying solely on online ARV estimates can be misleading. Comparable properties found online may not accurately reflect your property’s value due to differences in location, features, and conditions.
Do Get an ARV Estimate from a Reputable Source
Seek a professional ARV estimate from a highly regarded real estate broker. Real estate agents have in-depth knowledge of local markets and can provide more precise valuations based on neighborhood, season, and market conditions.
Don’t Take on the Whole Project Yourself
Reality TV shows may depict flipping as a simple task for a couple of ambitious individuals, but in reality, it's far more complex. Even if you possess specific skills like plumbing or electrical work, flipping a house requires various specialties.
Do Build a Team
Hiring a team of subcontractors can save you time and money in the long run. A team can help you complete the rehab quickly, allowing you to market and sell the house faster. Consider hiring an interior designer for high-end properties and ensure you have a reliable real estate agent to assist with finding and selling the property.
Don’t Spend Too Much Money
While making the property desirable to potential buyers is crucial, overspending on expensive appliances, fixtures, and surfaces is unnecessary, especially in a lower-end neighborhood. A house can only sell for so much, regardless of luxury upgrades.
Don’t Be Cheap
Conversely, skimping on quality can also be detrimental. Avoid using the cheapest materials and outdated appliances, as buyers will notice. This is especially important for higher-end properties.
Do Stick to Your Budget
Create a detailed budget before starting renovations and consider obtaining quotes from local contractors in advance. Having a budget helps keep expenses under control. Monitor your contractors to ensure they stay within budget and that everything goes according to plan.