House flipping is a type of investment that involves buying houses and quickly reselling them for a profit. The investor can either buy a property and makes some repairs then sell it, or buy a property in a market where home values are rising rapidly and resell it after some time without making any repairs. A lot of people make money from house flipping, and you’ve probably seen some on TV shows. They may make it seem easy, but house flipping is not as simple as it looks. It can either be a dream or a disaster. However, if you do it the right way, house flipping can be another way to make money.
Therefore, if you want to get into this business and make some extra bucks, check out these tips on how to get started flipping houses.
Understand Your Market
It’s very important to research and understand your real estate market. You need to know where people want to live at that time, the kind of houses they want to buy, the value of houses in that area, and so on. This will help you to identify the property with the highest potential. Also, consider all the factors that could affect the price of the property and how quickly you can resell it. It would also be great to work with a real estate agent who has experience in your neighborhood. A good agent can help you target your property search based on your budget and desired profit.
Read About House Flipping
Before you dive into the business, it’s good to have some basics first and understand the nature of the business – and what better way to get this information than to read books on flipping houses? Such books contain invaluable information and will give you the knowledge you need to start networking and flipping houses.
Follow the 70% Rule
The 70% rule helps you to determine if a property is worth investing in or not. It is a way to determine the price to pay for a fix and flip property. The rule states that an investor should not pay more than 70% of the ARV (After Repair Value) of any property minus the cost of the repairs required.
Suppose a home’s ARV is $150,000, and it requires $20,000 in repairs, the rule says you should not pay more than $85,000 for the home.
$150,000 (ARV) X 0.70 = $105,000 – $20,000 (repairs) = $85,000
Research Listings and Foreclosures
You can find foreclosure listings on various websites such as Foreclosure.com, Zillow and Auction.com. The law is very clear on how many missed payments before foreclosure hence when a homeowner is not able to make the payments, their lender can take back the house and put it up for auction. Legitimate auctioneers put notices in local newspapers and list the property on their websites. Therefore, you can buy such property at a cheap price and resell it to make a profit.
The quicker you can sell a house the better. Once you’ve purchased a house and made the necessary repairs, don’t hold on for too long as it will cost you more money. Therefore, do everything you can to give buyers a great first impression to sell the property as quickly as possible.
Flipping houses is a risky business but very profitable if you make smart decisions. Note that in most cases, spending a lot of money remodeling a flip will not make you more money. Therefore, it’s better to make economical repairs and simpler remodels. An experienced real estate agent can provide the knowledge and guidance you need to make smart decisions.
Have you tried flipping houses? Share your experience below!
Like Saving Advice? Subscribe!
Subscribe to get the latest Saving Advice content via email.