Okay, you watched some house-flipping reality shows on HGTV and thought, “Hey, I can do that.” So, you read some books and talked to a few people who have flipped houses before and you’re finally ready for your first flip. The best way to learn how to flip your first home successfully is by jumping in. However, don’t go in without a plan and a lot of research.
Follow these steps on how to flip your first home and you’ll be on your way to house-flipping success.
1. Research Your Market
I’m sure you’re already perusing real estate websites night and day, but take a big picture look at your area and your budget. If you only have a small amount of cash to work with, start focusing on neighborhoods with homes for sale that you can afford with financing. You can work your way up to bigger-scale projects later.
A surefire way to research the market is by talking with a real estate agent. Make sure they have experience working with house flippers, though. Your goals are very different than someone looking for a primary residence and a knowledgeable real estate agent can give you relevant advice.
Your market might not even be in your own city. Check out these Emerging Cities for House Flipping.
2. Line Up Financing Early
Time is money.
This is especially true when flipping properties because you’re either competing against other motivated buyers before the sale or getting the home ready to sell so you can make your return.
The last thing you want is to miss out on a purchase because you couldn’t find financing quickly enough. Make sure your financing is lined up before you start submitting offers.
3. Find Your Contractors
Just like having your financing lined up, know your contractors and make sure they’re ready to move when you are. You don’t want to be stuck with a home in need of renovations but no team to get started. The faster you can start and finish the renovations, the quicker the payday will come.
Network with contractors and find those who can do the work you need and will be available when the time comes. These should be trustworthy contractors with a solid history of great work.
4. Find a House
Once you’ve narrowed down your ideal property, gotten your financing squared away, and found your contactors, it’s time to find the house. While there are many different types of real estate properties you can flip, single-family homes are a great place to start.
5. Start the Renovations
At this point, you should just be carrying out the designs that you planned earlier in the process. Don’t wait until you close to make these decisions. Remember: move fast.
Design and renovation decisions are up to you but don’t go too crazy and put too much personality into it. You’ll want a design aesthetic that appeals to a lot of people since you don’t know who your potential buyer will be. However, you can still have fun with it.
Beware of some of the trickier aspects of home renovation, though. For instance, maybe removing a wall will really open up space in the living room. This would be great for increasing value. But, be aware that the wall may have electrical that needs to be moved by a professional or contains a support beam. Make sure your team of professionals handle some of these tasks so you don’t end up hurting yourself or your investment.
Additionally, don’t spend money where you won’t see a good return. If the roof is a little old, but still has a lot of life in it, you don’t have to replace it. A big-ticket expense like that will cost a lot in dollars and time and won’t yield a great return. Make sure to take care of essential functional repairs if the home needs it, like leaky pipes or cracked windows, but in many cases, don’t fix it if it isn’t broken.
6. Sell it!
When pricing the home, keep in mind what your capital gains taxes on the final sale price will be, as well as any realtor fees. A slim margin might be eaten by taxes if you don’t factor that in before deciding on the home’s list price.
Don’t Compromise On Your Plan
Make a plan and stick with it. You may be eager to jump on any property that looks doable, but have some patience and wait for the perfect opportunity. This will save you time, headache, and money in the end. Follow these steps on how to flip your first home to maximize your chance of great returns.