Flipping houses consisted of 7.5% of all home sales in the U.S. housing market this year, drastically increasing from the previous year thanks to the rising popularity of house flipping shows. However, house flipping isn’t as easy as presented on television — but it can be very lucrative and a great way to get started in real estate investing.
Whether you’re considering investing in house flipping or invested in the property but aren’t sure where to start, here are the necessary steps to take.
Find a Suitable Real Estate Market
Even if you buy a reasonably priced property with its renovation and homeowner’s insurance costs within your budget, that doesn’t automatically translate to a hefty profit. In fact, home flippers drastically earn differently in various regions. Some of the best states for house flipping are Pennsylvania, with an average return on investment (ROI) of 162.4%, and New Jersey at 141.6%.
Of course, these places may fall beyond your scope, but that doesn’t mean you can find great deals in your location. Venturing out of your zone can help you find a more lucrative area to flip a property in.
Create a Budget
Once you’ve chosen a location, it’s time to set up a house flipping budget. Make sure you add in a buffer to address unexpected expenses that may emerge along the way. However, no matter what your budget is, it’s best if you buy a property with all cash, cutting out mortgage applications and lengthy approval process, plus it makes your offer more attractive to sellers.
Network with Contractors
When house flipping, you also need to begin building relationships with contractors before your first flip. Doing this saves you money while giving you a reliable team. These contractors include electricians, plumbers, HVAC experts, or general contractors. Unless you’re doing all the work yourself, including labor, half of the house flipping business revolves around building a network, and contractors make up most of that.
Shop for a House
While most experienced house-flippers go for homes requiring complete renovation, it’s best to stick with cosmetic repairs or updates for faster and simpler renovations for your first couple of projects. Additionally, when shopping around for homes to flip, finding good deals is essential.
That means buying a house below the market value with broad margins that’s enough to cover several expenses, such as closing costs, carrying costs when renovating, and realtor fees. There are several ways you can find below-market deals on properties to flip, from working with a realtor to find on-market deals, wholesalers for off-market ones, or build a direct mail marketing campaign.
The final step of house flipping is the simplest, and that’s selling the home. Most of this part is handled by your assigned Realtor. However, for the pricing, you’re the one responsible for it. You can lean on the Realtor’s expertise for the pricing, which should give you their opinion after-repair value (ARV) of the home, helping you set a reasonable price.
House flippers take properties that most homebuyers wouldn’t even think of buying or aren’t willing to renovate, improving them until meeting buyer demand. It can be a lucrative investment when done right — and following the steps mentioned streamlines the process, ensuring you get the best deals and huge returns.