Flipping a house for quick cash or monthly cash-flow can be a profitable enterprise if you limit your risk and follow a few proven real estate strategies. There are always excellent rehab investment opportunities available that need to be updated. Like any other skill set or investment strategy, there is a steep learning curve to be considered. The good news is that with practice you can improve your skills and profits.
Review Your Cash Reserves and Financial Assets
The first step to real estate investment is to know how much you can afford to invest and how long you can wait for a return on that investment. Depending on your financial resources, you may need to find investors. It is common for flippers to use other people’s money.
If you know where to look, it is not difficult to find financial partners. Banks, family members, hard money lenders and private money lenders are four possible sources of funding. Each of these funding partners has advantages and disadvantages depending on your unique circumstances.
Hard money lenders can close quickly with few underwriting requirements for the borrower, but they are high-cost loans. Banks usually offer the best rates but require a lot of paperwork and time to get to the closing table. Personal funds are great if you have then available, but it is important to remember that flipping a house often comes with unexpected costs that can strain personal finances.
How to Identify an Investment Home to Flip
This may sound simple enough, but it is not. Flipping projects are all about finding a house that you can repair and update with a respectable profit margin incorporated into the numbers. Very few homes qualify to be considered because the numbers don’t add up for a favorable end result.
A property that is in need of cosmetic changes and upgrades that is in a good neighborhood is the answer. Knowing which repairs will boost value the most is crucial. For example, spending $5000 to add a beautiful Gazebo won’t boost the value of a house like updating a kitchen or bathroom. The devil is definitely in the details when evaluating homes to flip.
Many homes purchased to flip aren’t represented by real estate agents. Obtaining investor lists of homes for sale from real estate investment organizations provides an excellent selection of fixer-upper homes that need to be upgraded. Real Estate Investors Association’s (REIA) are located all over the country and offer an excellent networking opportunity to meet investors and get on their mailing list. SmartAsset reports that two of the best locales for flipping properties are Reading, Pennsylvania and Pittsburgh, Pennsylvania. Following close behind these hot cities known for high profits are Orlando, Florida, South Florida, Philadelphia, Pennsylvania and New Haven, Connecticut.
Establish a Strict Budget for the Project
Number crunching is key for success as a house flipper. Research is critical to ensure renovation figures are accurate. The entire transaction falls apart if you underestimate repairs or overpay for a home. Specifically, a beginner must study the data and run the numbers carefully to be sure all the hard work and investment will pay off. Just one mistake can turn a profitable project into a disaster that loses money.
Knowing your market means you know what you can sell your home for once it is repaired and spruced up. By carefully planning the renovation and understanding what buyers expect in specific neighborhoods, it becomes easier to pick and choose the projects that will deliver the highest prices and best margins.
Build (or Source) a Pro Real Estate Advisory Team
All successful real estate flippers rely heavily on a team of experts to make it happen. Bigger Pockets reports that a team of professionals will help you complete the project faster and with more efficiency than is possible for a single person who tries to do it all.
You need to assemble a team of contractors, real estate brokers, architects, lenders, insurance professionals and other experts so that you can make good decisions. No one can be an expert in all these areas. Surrounding yourself with trustworthy professionals who can help with your projects is crucial for long-term success.
This is where New Leaf Properties can help. Over the years, we’ve assembled one of the best real estate investment teams in Florida. We offer advisory, guidance, and can even source projects that fit your budget.
Oversee the Project and Timeline
Investing in a house for the purpose of flipping it is a time-sensitive proposition. We’ve all heard the expression that time is money, and that has never been truer than it is for flipping a home. That’s why creating a strict timeline is as important as any other aspect of this type of project.
Being on the job as a project manager to supervise the progress is always advisable. Not only is that type of oversight an excellent way to learn, it is also imperative for anticipating problems before they get too big.
Market and Sell the House
The final step in the process is selling your masterpiece. LendingHome reminds those interested in flipping houses that pricing the property for the right amount is key for reaping the rewards you deserve. As you learn the ropes, every beginner should reach out to realtors for help in pricing to ensure profitability.
Real estate agents vary wildly in terms of experience and commitment. When it is time to hire a realtor for a specific project, it makes sense to focus on their experience in your chosen market.
Did you know that New Leaf Properties can also represent you in your real estate sale?
Considering the networking opportunities and data available for real estate agents, many investors interested in the flipping business model decide to invest in getting a license. As compared to other educational pursuits, it is relatively inexpensive in terms of time and money expenditures to earn a real estate license.
Investing in real estate for the purpose of buying low and selling high is a time-tested way to earn healthy profits. While there are plenty of people who are doing very well using this business model, it is important to keep risk at a minimum. Hiring trusted real estate investment experts and carefully overseeing the rehab process yourself will increase your chances of earning the profits that justify the risk.