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“House flipping” has gained mainstream popularity thanks to the success of TV shows such as “Homes under the Hammer” and “Flipping Out.” Although these shows make it appear that house flipping is easy, it's not, and it is also, in fact, risky.
The following are some tips to help newbie residential real estate investors turn a profit on flipped houses.
Research
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There's a reason most of those who are successful at flipping houses are the ones who have been in the real estate industry a long time. Flipping houses isn't just about finding a cheap house, fixing it, and selling it at a profit. Real estate investors eager to get into the house flipping craze should educate themselves on the ins and outs of their local real estate market, the intricacies of home equity lines of credit, mortgage loans and other home financing options, and the cost and effort involved in repairing and updating a home. All this information minimize risk and increases the chance of turning a profit.
Start only when financially ready
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Flipping houses entails a lot of capital. Apart from the cost of acquiring a residential property, there are loan interest rates, property taxes, capital gains tax when selling above the purchase price, utilities,and renovation costs, not to mention advertising. Investors should factor all of these costs in the equation.
Look for quick-fix houses
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The most flippable houses are those that don't need a lot of time or resources to get them ready for sale.
Houses with cosmetic defects such as chipped paint and pockmarked walls are relatively cheaper and easier to update and flip than homes with more extensive damage such as mold and plumbing issues. Many flippers are handy with a hammer themselves, and remodel their own for-sale properties to cut back on repair costs. Others are good at networking and have amassed a number of useful contacts in the plumbing, carpentry, electric, carpet-laying, and landscaping industries.
House flipping can be fun and rewarding, but real estate investors should be aware of the hard work and research it entails before pursuing it as a career.
For more articles and tips on investing in real estate, subscribe to this Steve Liefschultz of Equity Bank blog.
