Things You Absolutely Must Know About Flipping Properties
It’s really entertaining to watch one of these “flip this house” shows on cable TV these days. Within the span of about 30 minutes, including commercials, a real estate investor finds the perfect home to flip. The home is purchased, the contractor hired and at the end of the show the home is sold for a tidy profit, bringing thousands of dollars to the investor. And you might think, “Hey, I can do that!” You can do that, in fact. But if you’re getting ready to go out and flip your first home, profitably, here are some things you’d better know about in advance. Don’t learn on the fly, but follow the advice of successful flippers so you don’t make the same mistakes they did.
Know the Neighborhood. You need to be familiar with the neighborhood where the property is located. You don’t have to live in the neighborhood but know about it. Historically, have houses sold in the same amount of time that houses in other areas have sold? Is it an established neighborhood where property values have held over time while gradually increasing. How are the schools? These are things you need to know before embarking on a flip.
The Price is Right. This is obvious because flipping means buying low and selling for more but you can’t afford to pay full retail for a property and then add another $30,000 for repairs. You won’t get your money back and there are buying and selling costs you need to consider. Your buy price is the most important element for a successful flip.
Keep Liquid. Keep some cash on hand available to be used as a down payment and closing costs. You never know when the ideal opportunity will present itself but you don’t want to be in a position where the perfect property shows up and there aren’t enough funds in the bank to complete the transaction. If you’re using private funds, you can expect a down payment of 30 % or more.
Be Accurate. If you’re not a general contractor then don’t act like one. When reviewing the property, take your contractor with you who will make a complete evaluation of what repairs need to be made, for how much and how long it will take to complete the repair work.
Your Head, Not Your Heart. Keep your emotions in check. Don’t “wish” a final selling price but work with your contractor and your real estate agent to arrive at the right price. Speaking of the right price, you want your home priced to sell, not sit on the market for 30 days. The longer it takes to sell, the less profit you will take home.
Have a Buyer at the Ready. Successful real estate flippers already know who they can sell the property too well before even making an offer. If you have someone who is readily able to buy whatever you can bring to the table, you’ll make more money because the selling time is essentially zero.