Does the idea of flipping houses sound easy and appealing to you? Just because the guys on TV do it, that doesn’t mean anybody can.
Flipping houses requires extensive knowledge and access to the right resources. Without the proper support and direction, you won’t last very long in the business.
Aside from the properties themselves, you have to have a few other things in your back pocket.
Make sure you’re financially stable
While you don’t necessarily need a bunch of spare cash lying around to fund a house flip, you do need a way to finance the deal. If you’re going to purchase properties on your own and won’t be paying for them in cash, you should make sure you’re prepared to take on a second or third mortgage.
According to Park View Legal’s Crunchbase page, you need to ensure your credit is in the right place before attempting to take on any more loans. But even if you don’t have enough credit to finance the project on your own, there are other opportunities.
For example, local investors frequently look for ways to diversify their assets and put money in short-term investments. If you can instill confidence among investors, you might be able to fund a house purchase without spending a dime of your own money.
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Get a team of professionals on line
Rarely can one person flip a house. You’re likely going to need a team of professionals to get the job done. Ideally, if house flipping is part of your long-term investment strategy, you’ll build a regular groups of funders and experts and use at least some of them on every flip.
Depending on your existing skillset and how much hands-on involvement you expect to tackle, you may need a handyman, various contractors, a lawyer, a real estate agent, an accountant, an insurance agent, and a home inspector.
While each team member will cut away at your profit, they also protect it by ensuring speed and accuracy.
Understand the local market
No industry in the world is more dependent on location than real estate. Property values change from city to city — and even street to street.
In the beginning, it’s best to focus on a single neighborhood and study it tirelessly. Learn about the ebbs and flows, what factors are driving prices, how long homes stay on the market, and what homeowners are looking for. You should never invest in an area that you haven’t first spent time analyzing.
When flipping a house, you should stick to the 70 percent rule (or something close to it). This rule tells you to start with the price you believe you’ll be able to sell the property for eventually and multiply that by 70 percent (.70).
Then you deduct the estimated fees and repair costs. The resulting figure is the amount you should pay for the house.
Learn to be very patient
Finally, you have to make sure you have patience. If you’re too anxious, you’ll likely make poor financial decisions and end up with little or no profit.
House flippers understand that it may take some time to find the right deal, but when one comes along, it can be incredibly rewarding.
