Getting your start in house flipping can be exciting, but it can also be quite daunting. Flipping a house takes a significant investment of time and capital, and with housing markets acting as unpredictable as they are, there’s real risk involved. For those looking to be successful at it, it pays to see what techniques and tactics make other flippers good at what they do.
In that spirit, here are five tips from expert house flippers that will help your flips be more profitable.
Be a Smart Buyer
When looking to buy a property, there are three things to consider: what you will pay for it, what it takes to fix it, and what you can get out of it. You make most of your profit by choosing a property that you can buy at a low price. Buying a property that’s close to the market value of other homes in the neighborhood means you don’t have much room to make a profit. Likewise, buying a property at $50,000 and then spending $100,000 on rehab isn’t likely to leave you a very wide profit margin.
Lastly, you need to be aware of the surrounding area; depreciating home values or a poor market will make it hard to sell at the price you want. If people don’t want to live there, they won’t be interested in your property no matter how nice it looks. So don’t go for properties in difficult markets just because they’re cheap.
Estimate, Budget, Execute
Flipping houses is a numbers game, so you need to be accurate with your math. Put together accurate estimates for what it’s going to cost to rehab the property, including some buffer for incidentals or surprise costs. Once you have a detailed plan for what you’ll be fixing and how much you’ll pay for it, stick to your budget. Deviating from the plan rarely ever saves you money, and often doesn’t earn you more when you sell.
Once you have solid estimates and a detailed budget, it’s time to go to work. Do the work that you know how to do, and that can be done quickly. Anything that’s too technical or that would take too long to do yourself will be better off in the hands of professionals who are equipped to do the work, so don’t be afraid to hire someone to do the electrical, or to handle 1000 square feet of sheetrock.
Build a Reliable Team
Speaking of hiring people, you’ll need a team to pull this off. This includes the real estate agent who will help you find the property, the contractor who will help you rehab it, and so forth. You’re not going to know how to do everything. If there’s any task you can’t teach yourself to do then be prepared to bring someone on. It’s better to have someone help you make accurate estimates, for example, than to try to estimate it yourself and be off by thousands of dollars. Besides, if you build the right team, they will be around to help you on future flips, and the process will get more fluid as you practice.
Design Smart
Remember, you’re not going to live in this house, someone else is. Save all the quirky design ideas for your own home, and design the property to have a broader appeal. Don’t paint the kitchen purple, and don’t use fluorescent green tile in the bathroom. Use tried and true design standards so that your property is attractive to the widest possible market. You don’t want buyers turning around because you installed bright blue cabinets in the kitchen.
Don’t Overdo
They say “a job worth doing is worth doing well,” but that’s not always true for flips. There’s a threshold of investment beyond which your returns don’t match the capital you put in. There’s no sense in spending an extra $15,000 to replace the cabinets in the kitchen, when buyers are only going to pay an extra $5,000 for it. Know when “good enough” is good enough, and call it a day.
For more tips on how to successfully flip houses, contact the pros at Real Estate Elevated.