House flipping is a great way to make extra money on the side or to make a full-time income if you are ready to commit fully. There are always changes in the housing market, so understanding how the market works and having real estate agents as close allies will help you greatly as you are hunting for properties to renovate. While there are many public speakers and Tv shows that make house flipping looking super easy, as the fast track to making millions, there is a lot of thought and work that needs to go into each flip to leave with a profit. Here is an overview of the house flipping checklist you’ll need to follow.
1. Find the perfect project house.
One of the factors that will dictate your success as a house flipper is the house you find to renovate. The key is to get a bad house in a good neighborhood, so you can bid low and sell high. When looking at houses, you need to research the going prices for comparable houses, so you have an idea of what your selling price can be. You then have to estimate how much it will cost to renovate the house to determine what you need to buy it to turn a profit.
2. Get funding.
Assuming you don’t have investors, you’ll need to look into fix and flip loans to fund the project. A flip loan from a hard money lender is based on the premise that you are not planning to live in the house or keep it long-term. The goal is to renovate the house and sell it as quickly as possible, so these are not viewed as long-term loans.
3. Start with the essentials.
When renovating, always start with the critical functions of the house, so those are done in cases you need to cut back on the original plans later. It is better to run out of money for updated crown molding than to pay for repairs to the HVAC system. The cooling system, thermostat, and furnace are all part of the HVAC system, and they are essential to the house’s value. Installing a new HVAC system or updating the AC system and furnace already in the house will make it more energy-efficient, lowering the money energy bill. Buyers will see this as a huge advantage as they don’t want to deal with high energy bills down the road. Knowing the furnace and air conditioner are new will also be a selling point because the buyers will know they won’t be facing those large expenses shortly.
4. Move to the cosmetics.
The cosmetics are the renovations that make the space more visually appealing but do not impact the house’s structure. When buying an investment property, you always have to keep the eventual buyers in mind. This isn’t going to be a rental property. When you buy houses to flip, the goal is to sell them. You will attract more potential homeowners by putting thought and effort into the design renovation of the home. Real estate is very competitive in many areas, so you need to make sure your house stands out among others in the area. If there are signs that your AC needs a replacement, buyers will be hesitant to buy.
5. Sell fast.
The faster you sell the house, the more room for profit you will have because your expenses will automatically be lower. For example, each money you own the house, you are paying on the utilities, the flip loan, and the property taxes. That money adds to the total expenses for the project, so the less you spend on monthly expenses, the more profit you will have. You must first pay off your hard money lender when you sell the house, so the flip loan is taken care of. You then need to cover all of the renovations expenses that went into the house, whether you paid for them out of pocket, with a loan, or from investors. The money left over after all of the expenses are paid will be your total profit.
Each of these items will have its own checklist, which will vary based on your project. The longer you are in the business and the more professional contacts you have for people you can work closely and quickly with, the more successful you will be in the business.
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