House flippers make about $30,000 per flip on average. Profits can be much more in other states. While you can make a good amount of money, there are things to avoid when flipping houses. You can easily not make a profit or even lose money.
Keep reading to learn how to flip houses the right way.
How Do You Flip a House?
House flippers are investors who buy houses and intend to resell them fast. From the day of purchasing the property, it usually takes a few months or about a year until they’re sold again.
An investor can flip a house by holding onto it and then reselling it for a higher price. Another way of house flipping is to make repairs and updates in order to increase the value of the house.
Steps to Flipping Houses
Follow these steps to ensure you’ll make money rather than lose it.
1. Use Cash
Taking out a loan to finance a house flip will reduce your final profit. All of the interest builds up and takes away from the money you’ll make. You’ll also have to hike up the house’s price to at least make something.
If you’re really unlucky and the market is slow, you’re likely to sell the house for less than you were planning to because you can’t afford to wait for the market to pick up. Paying with cash gets rid of worries about interest and allows you to wait longer to sell a flipped house.
2. Know the Market
It’s important to know the average price homes sell for in your chosen neighborhood, so you can judge if the house has the potential to be profitable. You won’t make a profit from an overpriced house that you can’t sell. The house should be listed on the lower end of the neighborhood’s price range, so it’s more likely to be sold.
Understanding the market will let you know if you’re paying an appropriate amount for the house. You should pay 70% to 80% of a houses’s value.
To have a chance of profiting, the house has to match the neighborhood. You wouldn’t flip a house into something high-end and expensive if the neighborhood is lower middle class. No one would be able to buy it.
A local real estate agent will help you get to know the market.
3. Think Ahead
Make a budget before you buy the house.
Add up how much you’d buy the house for, the estimated amount for repairs and updates, and then calculate the lowest price you’d sell it for. This will give you an idea of how much work has to be done to the home, and if it’s all worth it for the profit. A contractor will tell you the price of repairs and updates.
To avoid any surprises, get a home inspection to see if everything is up to code. You don’t want to run into an issue that will bring you over budget. Some things that will definitely cost you are damaged chimneys, old electrical wiring, foundation cracks, and buried oil tanks.
4. Make a List
Going crazy with renovations is dangerous. You’ll quickly exceed your budget. After noting all of the large projects that have to be completed, such as a new HVAC system or chimney, consider smaller changes that will add to the value of the home. For example, replacing old carpet with hardwood floors or new carpet from carpetmelbournedirect.com.au.
You don’t always have to go overboard. One of the most important rooms is the kitchen, and you could do some simple things to save money. Updating appliances and countertops may be a must. However, why replace perfectly good kitchen cabinets when you can just stain or repaint them?
Once you have your to-do list, stick to it as closely as you can.
5. Sell Your Flipped House
You can either hire a realtor or sell the house yourself.
Paying the realtor can take a chunk out of your profits, but it’ll help your house be seen by more buyers. If you want to keep that money, you’ll have to get a real estate agent license. This costs less in the long run and you’ll learn important skills.
Flipping homes can go very wrong.
Use the contractor, home inspector, and local real estate agent to your advantage. Avoid extravagant renovations to keep your profits high and always make sure you understand the market.
This guide will help you succeed in flipping houses and build your career as a house flipper.
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