Fixing and flipping houses is a popular way of making money in real estate. Many successful real estate investors started with flipping houses early in their careers before venturing out into larger properties like apartments.
If want to launch a real estate business by fixing and flipping houses, here are some important factors to consider.
Flipping houses requires serious money
You need to have plenty of cash or credit available in order to flip a house. Many investors use rehab financing to cover the purchase and remodeling costs of the property.
Flipping houses requires serious work
Be ready to roll up your sleeves and get your hands on the computer keyboard. Get to know your real estate market by doing thorough research and make a spreadsheet of the houses you are targeting.
When choosing houses to buy, you’ll want to look for properties that require only cosmetic work such as cleaning up, repainting or re-flooring. You could end up with no profit at all if you have to make repairs on the foundation, wall structure, plumbing, heating or air conditioning.
Go to your local home improvement store and get prices for all the materials needed. After flipping a few houses, you will eventually learn how to estimate the costs of materials and labor for each project.
Work the numbers and calculate how much a house will cost you, including purchase price, materials, labor, holding costs, closing costs and unexpected costs. Compare your expense figures with the expected sales price so you can determine which houses offer the best profit.
Flipping houses requires serious resources
Study your financing options. If you are not using your own money, talk to a loan officer to know the advantages and disadvantages of using rehab financing or an investment property loan.
If you are not doing the repairs yourself, make a list of remodelers in your area and choose judiciously. Hire someone who can begin making repairs immediately so you don’t waste precious money on mortgage and utilities for a house that could be sitting for a while after closing.
For some investors, flipping houses is more than just a way to make a quick buck. It’s a great opportunity to help the poor lad who suddenly lost his job get something out of his foreclosed home, and a fun way to squeeze out those creative juices as you turn a run-down property into someone’s dream home.
If this is your first time venturing into real estate, you can take advantage of top-notch training from the Rock Bottom Blueprint, a 5-week real estate investing course that can help you find and acquire properties at rock bottom prices.
{ 4 comments… read them below or add one }
This is a fascinating idea. I think I will look further into this ‘house-flipping’ thing as it seems like money for nothing! Perhaps a bit of hard work, but no real outlay of money. I’ll definitely be reading your other articles.
You provided the top tips here. The need to be realistic and serious about such an undertaking is really important because it is a costly move to start renovating houses, and you have explained that in a great way. Some people may think it sounds easy but you have to put serious effort and follow through the kind of steps you mention such as doing research and creating a spreadsheet, getting your hands on the materials you will need and making sure you know how much the work will cost. Thanks for this useful resource!
A very fine read; I’ve been thinking about giving this a shot and this gives me confidence I can do it. I’ll definitely not overlook planning costs as it’s very important like you mentioned in the article.
Fixing up and flipping houses for profit is a great idea, but you better be willing to hang some sheet-rock , painting, replacing floors, and a lot of other remodeling. It would be a great idea if you did in fact have a cash flow. I have seen houses sell for $70k and the contractor put in $20k worth of labor and materials. Then the house was listed and sold for over $150k. It took him a couple of months for the remodel and then a few for the closing to go threw. So he had $90k tied up for half the year to make over $60k. Well worth the ROI only if you can afford to sit on $90k.