With the proper investments and a keen knowledge of the housing market, flipping a house can be a profitable and rewarding experience. But it takes a lot of work and needs to be done right. So before you roll up your sleeves and pull out the toolbox, learn the necessary steps to making your house-flipping project easy, fast, and lucrative.
Part of the appeal of house flipping is the transformation process. Old or run-down houses become new again, offering a warm and welcoming space to prospective buyers. But a house doesn’t become a home overnight, and the funds required to complete renovations may be more than you initially expected. When calculating home improvement costs, take into account not only the price of your favorite tile backsplash but the money required for labor and tools as well. Costs for maintaining a property while renovations are underway also need to be paid. Be prepared for mortgage payments, taxes, insurance, and marketing costs, and understand that a $10,000 project may realistically be twofold.
Flipping a house first requires that you buy one. Conventional investors require a 25% down payment on a house, while hard money lenders give short-term mortgages to almost everyone — but with higher interest rates. Seeking out a private money lender gives you the freedom to determine payment options because the lender may be a friend, family member, or colleague. If you go this route, it’s suggested you secure transactions with a promissory note, deed of trust, and purchase hazard insurance so both parties are legally held accountable and money may be returned in case unexpected damages occur.
Just because you put a lot of work and energy into your fix-it-up house, doesn’t mean you can list it above market value. It’s therefore important you understand housing prices in your neighborhood and invest in a house that will pay off, even if you don’t sell it for $30,000 more than competing properties.
Know the Standards of the Neighborhood
Before commencing all construction efforts, know what kind of properties sell easily in your neighborhood. If you invest above and beyond, you may not necessarily see a return on your profits. Be savvy about what materials you use during the renovation – do the counters really need to be granite or will laminate do just fine? It’s important to understand that a $500,000 house probably won’t sell in a $350,000 neighborhood.
Do the Work Well
Whatever projects you decide are necessary for the beautification of your home, make sure they are done well and will stand the test of time. Make some calls and invest in a quality contractor to ensure your project will be worth the investment. If you want to save money and do the work yourself, determine how much of your time is needed and how much you are willing to spend. Will you really save enough money doing it yourself to justify not hiring a contractor? At the end of the day, a prospective buyer wants their home to look like it was professionally renovated.
While you don’t want to go overboard when you glam up the place, adding special touches can seal the deal. Be sure to make lighting and plumbing fixtures shine to give the house an updated feeling, even if you didn’t install brand new amenities. If it takes a load off a prospective buyer to see a nice bathroom sink, the load may ultimately be taken off of you. Don’t be afraid to add some pizzazz – buyers will appreciate your attention to detail.
As long as your house is on the market you will be spending money on payments, marketing efforts, and all other costs associated with owning a home. Adjust the price of your listing in relation to market prices, and be satisfied when your home is sold to a buyer who appreciates your hard work. You get to walk away knowing you did well – and with a bit of extra pocket money too.