Have you ever been interested in flipping houses? After watching too many episodes of Fixer Upper, Flip or Flop, Property Brothers, and Dessert Flippers. These three shows would transform the ugliest house on the block and turn it into someone’s dream home. I’ve dreamed of flipping houses at one point but that idea fizzled out when I started having health problems.
The amount of money that could be earned on a potential flip seems very appealing. But for first time flippers, the profit may not be in line with the profits that you see on HGTV. Seasoned flippers often have the cash flow and resources available to maximize their profits. Here are some tips on how to make your first flip successful.
Pay Cash for Your Entire Project
Flipping houses is appealing because most people see the quick return on their investment. But seasoned flippers always pay cash for purchasing the home, labor, and materials. Dave Ramsey, a financial advisor helps clients dig themselves out of debt, recommends investing only cash into a home flip. When you are using cash to fund your house flip, you don’t have to worry about the high carrying costs. If you must use credit to purchase materials, always look for interest-free loans but be wary of the terms because it could cost you at the end of your flip.
Financing a house flip may sound appealing but when you have a loan, there is more risk involved in your investment. Borrowing a massive amount of money puts you into debt from the start of the project, even if you are borrowing enough money to pay for the renovations.
There are so many unknown variables when it comes to flipping a house, the timeline for getting the house back on the market can easily be derailed by unexpected problems. Your two-month flip could easily take longer, costing you more money in carrying costs. But when you use case, you don’t have to worry about paying a monthly mortgage or interest fees while you get your project back on track.
Also, do hesitate to purchase your materials before you close. This gives you the opportunity to get started on the project immediately.
Invest in a Home Inspection Whenever Possible
Investing in a home inspection will cost you a little bit of money upfront but it could save you thousands of dollars in the end. A home inspection often reveals any major problems so that you can factor it into the flip. Buying a house at auction or foreclosure, may not have that option available. Just keep in foreclosures are often neglected and homeowners typically didn’t take care of the property before moving out.
Hire an Experienced Contractor
You should do your homework and research contractors who have experience completing a huge project like a home flip. A skilled contractor, ask if they can give you a Homewyse tutorial. Homewyse can help you and the contractor determine project costs. But having a skilled contractor also can often foresee common problems that could affect your profit. You want a contractor who can estimate the cost of the project realistically and pad the budget with contingency items.
Do Your Research
Always do your research in the current market that you are wanting to purchase a home flip. Purchasing a home too close to the retail value could cause cost you before you even start a project. Take a close look at the comparables that have sold in the last year. It also would be a good idea to tour homes that are on the market to determine which trends you should go with as you flip a house.
Focus on the kitchen and bathrooms. These areas tend to add value to the house. Then the remainder of the house should get a fresh coat of paint and flooring. Instead, of buying high-end products, focus on those that are budget friendly and appeal to a majority of your potential buyers.
Don’t Be Afraid to Do Some of the Work
If you want to save money on labor, try pitching and doing some of the renovations that you can do. The more you can do the more savings you can see. Just don’t bite off a project that you aren’t sure that you can do. Cutting corners can backfire and end up costing you more money in the end.
Flipping house is very appealing especially if you could easily earn a large sum of money in a short period of time. If you don’t know what you are doing, there are house-flipping partners that can help you get started. This is a great option if you don’t have enough cash to fund a large project.