Are you considering getting into the business of flipping houses? Have you watched the shows on HGTV about flipping, and think it would be a breeze to do? You may want to think again, or at least do a little bit of research before you sink your life savings into a fixer-upper.
Home prices are increasing, which means it’s a good market in which to buy a fixer-upper and flip it. It used to be illegal to insure a house for less than 90 days, but that law changed in 2010. This opened the flood gates for flippers to go to work. In the 3rd Quarter of 2014, over 27,000 homes were flipped in the U.S.The average return was over $75,000.00 per home. This would tend to show that the market is hot. So what’s a wannabe home flipper to do?
Build your cash reserves
Do you have the ability to pay for a home to flip in cash? If not, can you leverage your retirement accounts, sell your own home, or cut back on your spending to raise the funds? Borrowing money to flip a house is like getting a loan to go to Vegas. Bad idea. It is much better to invest your own money, at least at first, until you absolutely know what you’re doing.
You must buy at a discount
This may seem obvious, but it cannot be overstated. The better the price you get when you buy the property, the more money you will make when you go to sell. How can you accomplish this? Use social media to let your followers know that you’re looking to buy homes that have been neglected or that need major repairs. You want to stay away from anything too bad, such as homes with structural issues. You must find motivated sellers, short sales, or attend auctions. Another option is to go to homes that are neglected and offer them an amount high enough for them to sell.
Do it yourself
The more you can do yourself, the more money you can save. But be cautious. Do not overestimate your skillset. Most of the time it makes sense to hire a professional. You can save money by doing the dirty work, such as painting, tearing out the old flooring and kitchens, and doing the prep and clean up for contractors.
Take advantage of this market if you’re thinking about becoming a flipper. Markets change quickly and later may not be a good time to take the plunge.