If you’ve ever watched one of the many house flipping shows on TV, you know there is good money to be made buying, renovating and selling houses. You also probably know that there’s a lot that goes into it. And of course, there’s a lot of things those shows don’t tell you. It’s definitely a risk – and you can end up losing money if you’re not careful. They never show this on TV, but it happens to even the most experienced real estate investors. So before you take the plunge, it helps to know what to expect.
Whether you’re thinking about getting into the real estate business for the first time, have some experience in the industry or are just looking for a solid investment, this guide will help walk you through the house flipping process.
1. Know Your Strengths and Weaknesses
Successfully flipping a house requires a lot of different parts coming together. First, you have to find a property you can make a profit on and secure it. Next, you need a design plan and a timeline. Then you need to have your contractors and suppliers lined up. And finally, you need to know how to market the house once it’s ready to sell, which may also include staging. Chances are you feel more comfortable with some of these tasks than others. But a misstep at any stage, and you could see your profits starting to go down the drain. That’s why it’s so important to make sure you’ve got the right team in place before you make the investment.
2. Find the Right House
Finding the right house to flip is really the most critical part of the entire process. The longer a house has been sitting on the market, or the longer it’s been since it’s been renovated, the better deal you’re likely to get. Foreclosures, sheriff’s sales and bank-owned properties are all good places to start, but finding the perfect house to flip requires a lot of homework. To really understand your profit potential, you need to look at the local real estate trends and compare your potential purchase to other houses in the neighborhood. You also need to know if you’re looking at mostly cosmetic fixes, or will have to make costly structural repairs or other updates that will take time and money, but won’t add value above and beyond the cost of the update.
For example, buyers will expect roofs that don’t leak, foundations that aren’t cracked and working HVAC systems. And of course, you’ll need to make sure you’re meeting all building and electrical codes. But these aren’t things buyers pay a premium for – they are basic expectations. Ideally, the goal is to find houses that need less of this kind of work so you can spend more on the finishes that will increase your profits. Either way, you want to inspect the home as thoroughly as possible so you know what needs to be done before you make an investment.
This is one of the reasons many real estate investors in the greater Philadelphia area team up with Home Cash Guys. We’ve bought and sold thousands of investment properties, so if there’s one thing we know, it’s how to find houses that are worth investing in and getting them for the right price.
3. Create a Work Plan
Before you pull the trigger on purchasing a house to renovate, you should have a good idea of what needs to be done, how long it’s going to take and how much it’s going to cost. Once you’ve begun the acquisition process, then the fun part (and the real work) begins. Creating a work plan is essential to your success, and will help you hit the ground running once the sale is final. There are certain things you can start before that even happens, like creating a design, picking out finishes and lining up contractors, but most of it will happen once you get the keys to the property. And it will start happening quickly.
Here are some tips for creating your work plan.
- Start the permitting process as early as possible. The sooner you get your permits, the sooner you can start construction. Remember, time is money.
- Make sure you have everything you need for demolition, including a crew, tools and a dumpster.
- Have a structural engineer ready to assist if you plan on removing any load-bearing walls or notice any issues.
- Schedule different tasks simultaneously when possible, but don’t try to do too much at once. You don’t want contractors getting in each others’ way.
- Order things like cabinets, flooring and tile early. You don’t want to hold up work waiting materials.
- Don’t forget the outside of the house. Hardscaping, landscaping and fencing can also go a long way to increasing your sale price.
- Build a few extra days into your schedule for unforeseen problems. And leave a couple days at the end to do any touch-ups.
We’ll cover each of these areas in more detail as we expand this guide. And we’ll also get into topics like choosing the right finishes, staging your house, and marketing and selling process.
If you’re interested in learning more, email firstname.lastname@example.org.