The house-flipping industry has been around for a long time, but plenty of house flippers still don’t know the ins and outs. They get stuck on one deal and never really get to experience all of the benefits this business has to offer. If you’re looking to get started house flipping or want some tips from an experienced house flipper, this blog post is perfect for you! We’ll discuss seven house flipping tips to help you make a profit and navigate our Texas real estate landscape.
7 House Flipping Tips That Will Help You Make a Profit
1. Write a Business Plan
Don’t jump into the industry without developing the strategy simply because you’re excited to get started. It’s important that you take the time to sit down and figure out a house-flipping business plan. You have to decide how much money you can afford to invest in each deal, where your ideal house is located, what type of house will give you the most return on investment (ROI), etc.
If this is something new for you, creating a business plan may not be as fun as scoping real estate listings and perusing other house flips for ideas, but it is worth it.
2. Know Your Numbers
In a previous blog post, we discussed the 70% Rule; while this isn’t a hard and fast law by any means, it can serve as a workable guide when deciding if a deal is good.
The house flipping formula is a little more complicated than that, but it is a good rule of thumb for all house flippers to know the numbers.
To be successful in property investment, you have to understand one key metric: return on investment (ROI). ROI is simple enough – you need your house flips to make money so you can take home a profit and put money down on your next project. However, keeping a close eye on where your money goes, what the potential after-repair value of the house will be, and the project timeline all affect the ROI of your project.
3. Be Patient
If you are a house flipper working on your first deal, it is important to have realistic expectations. It takes time to learn the process and coordinate with contractors and other vendors for repairs. Sometimes these lessons can cost real money and eat away at your ROI. However, it would be best if you had patience before expecting big profits from house flips.
Additionally, be patient when searching for real estate deals. Don’t jump into the first deal that comes your way. Perform due diligence, run your numbers, and get all your contractor and financing ducks in a row. Bottlenecks or surprises are not something you want to encounter. The adage “measure twice, cut once” works here when assessing a real estate deal’s numbers and also when installing that new kitchen countertop.
4. Hard Money is Your Friend
One of the best house flipping tips is that you should not be afraid to ask for financing. This may seem counterintuitive because house flips are often thought of as “all cash” transactions, and in some cases, they can still be this way. However, hard money loans have made house flipping accessible even when you don’t have tens or hundreds of thousands of dollars to put down on a real estate investment.
Smart house flippers know how to use leverage to their advantage. Hard money can help you finance a purchase and maximize your ROI while keeping your out-of-pocket cash to a minimum.
5. Know Your Contractors
Get to know the dependable people you will call when your project is ready to go. A knowledgeable, trustworthy contractor is essential in making or breaking your project’s timeline. To reduce capital expenses and maximize ROI, amateur house flippers will often try to do too much of the renovation work themselves. This usually ends poorly by delaying the project, creating more issues, or resulting in shoddy work that makes the house unappealing to buyers. Instead, stick to what you know and do best – let the experts handle the rest.
6. Spend Money Where It Matters
When house flippers get too attached or too emotional about design and renovation decisions, they might spend money on things that don’t matter to the buyer. Most buyers won’t notice or care about the difference between soapstone and granite, but your wallet certainly will. Spend money where it matters and make the house as appealing to potential buyers as possible.
Don’t: Put new flooring in every room.
Do: Replace the kitchen countertops and bathroom tiles first if you’re spending a bit more to flip houses.
7. Know the Renovations that Provide a High ROI
Not every aspect of the house needs to be renovated. Identify which renovations will provide the best ROI if you perform a rehab and renovate nearly all of the house. Consider how curb appeal affects the selling price and desirability of the home. Additionally, keep in mind that most buyers value kitchens and bathrooms above the other rooms in the house.
We’ve covered house flipping tips. Now, let’s talk about house flippers themselves! If you have a passion for real estate and know how to spot the right properties at the right time, house flipping could be an excellent way to add value to your investment portfolio or even earn yourself a steady income. One of the best ways to get started is to utilize hard money when purchasing a house to flip. Park Place Finance will get you approved for a hard money loan fast so that you can get started with your project!