There are many different ways that a person can profit when it comes to modern realty. Although investing in REITs and renting out properties are common choices, there's another option available for those willing to put in the time: house flipping! This technique is high-risk but can be very rewarding, with many people seeing a great ROI in short time frames. If you've ever considered flipping homes before-but haven't the faintest idea of where to begin-then this is the article for you!
The Magic Number
When it comes to flipping homes, 70 is the magic number. What does it mean? Well, most experts agree that 70% is the target budget you should go for when looking for homes to flip. Whereas many investments have a required minimum, house flipping has a maximum (and for good reason!). Let's say you found a home that you were hoping to sell for $600,000. You had it looked at by a contractor, and they estimated you'd need to put $70,000 into repairs and renovations. First, you'd take the ARV (After-Repair Value) of the home, and subtract the repair costs from the total. This leaves you with $530,000. 70% of $530 is $371, which is the maximum you'd want to pay for the home. Keep this "Magic Number" in mind, and let's talk about where to begin the process.
Raising Capital
You'll need to secure the proper funding before you can begin flipping modern realty. This can be done via pulling profits from your previous investments, your personal savings, or by taking out a loan. Once you've raised the necessary capital, it's time to get in touch with a realtor. The proper realtor should be able to help you find the most promising neighborhoods, saving time in your search for an ideal flipping house. At this point, you should also select a team of reliable contractors.
Now that you've found a promising house, it's time to make an offer. Don't get discouraged if there's a lot of competition, and remember to stay within 70%. It can be easy to get competitive when it comes to bidding on a house, but you'll only be hurting yourself if you overpay. Every extra dollar you spend comes out of the potential profits, and there's always the possibility of unexpected expenses popping up. Keep a level head, remain patient, and you'll eventually be able to find the perfect home to flip.
Speaking of expenses, there are a few other ones to consider beyond the purchase price. Here are a few of the costs you'll likely need to prepare for:
Inspection fees
Utilities
Insurance & property taxes
Marketing & real estate agent expenses
Closing costs
Repairs & Renovations
So, you found the home and completed the purchase: now what? Well, this is the point where you'll need to start making the necessary repairs and renovations. When you begin house flipping, it's possible that you might not have a lot of room to spare in your budget. If that's the case, then you'll likely need to save money where possible, which means doing as much of the work yourself as possible. This might seem off-putting, but don't worry. Once you flip a few houses, you'll have high enough profits to complete off-load the labor!
However, there will inevitably be some tasks you can't do yourself. You'll need to hire the best contractors to handle the permits & repairs. Fortunately, if you've followed this guide in order, you'll already have contractors lined up! In a best-case scenario, you should aim for project completion in six to twelve weeks. This won't always be possible, but it's vital that you complete the modern realty flipping project as soon as possible. The longer it takes, the less money you'll be making.
Finalizing the Flip
Finally, the renovations are complete and you can finally sell your home. This is where the realtor you've previously worked with can help again! Avoid trying to list the house yourself, as this is time-consuming and likely won't be as effective as working with a realtor. Realtors have the ability to create multiple listings at once using the MLS (Multiple Listing Service). This database will ensure your property is placed in front of as many potential buyers as possible, which is sure to help you finalize the flip faster.
If Flipping Homes Isn't Doable...
Don't worry! While you may not be able to flip a home not, that doesn't mean you can't start earning income from rental properties or investing. As time goes on, you'll be able to build your wealth, expand your investments, and-eventually-flip a house for a profit. House flipping can be a very lucrative business, but it's also extremely taxing and can turn your world upside-down in a hurry. When you're ready to give it a try, do so: just don't rush it! There will always be modern realty flipping opportunities if you know where to look.
