Financial Tips for Flipping Houses
In 2019, over 245,800 single-family homes and condos were flipped in the US. This was a 2% increase from 2018, which made it the highest point since 2006.
While flipping houses seems like an exciting and lucrative opportunity, you need to be aware that profit margins have continually dropped. So if you want to flip houses, you need to be smart about it to make a decent profit.
So before you dive into things, you need to learn all about flipping houses and more financial tips to be a success. Read on for a thorough guide on how to fix and flip properties!
Research the Real Estate Market
Before you jump into house flipping, you need to know the real estate market. This can prevent some costly mistakes, such as thinking a fixer-upper is worth your time and money, only to find that it won’t sell, no matter what.
Take some time to learn where some good locations are. It might be worth it to work with a real estate agent, as they’ll be able to advise you and help with the house flipping process.
A good place to start would be foreclosures. These properties will be attractively priced.
Check Your Credit Score
Without a good credit score, it’ll be hard to flip houses. That is, of course, you’ve got all the cash upfront to pay for purchasing property.
But the reality is, most house flippers will need some type of loan to fund the sale since it’s a lot of money to spend at once. For example, you’ll probably need Kiavi bridge loans to get short-term financing when flipping houses.
Because of this, you’ll need a solid credit score. Otherwise, you’ll be hard-pressed to find a financial institution that’ll lend you money.
Request a credit report and see your current standing. The good news is, you can request a free credit report every 12 months, so if you haven’t done so in the last year, take advantage of this.
Generally, a good credit score is anything above 670, but of course, the higher, the better. Not only will you be able to borrow a higher amount, but the interest rate will be lower too.
If you don’t have a great credit score, then you need to build it up ASAP. Some quick ways to do this are to pay down debt, pay all bills on time, and keep your credit card balances as low as possible.
Know Your Strengths and Weaknesses
Flipping houses will take a lot of skill and knowledge to do correctly. Mainly, you’ll need expertise in real estate, construction, and design. So if you’ve already got these skills down, you’ll have a much easier time.
If you don’t, that’s ok too, so long as you realize you need assistance in these areas. Start researching local professionals and build a “team” you can count on to help you get properties into tip-top condition so you make the maximum profits possible.
Some experts to consider include real estate agents, lenders, contractors, and insurance agents.
Have the Properties Inspected
The key to making house flipping worth your time is finding properties that don’t need extensive work done to be sold.
But you can’t always judge a book by its cover. A property that might look ok on the surface might need lots of major repairs. This can eat into your time and money.
So it’s important that you get a home inspection done before you make a purchase. For those buying on a real estate auction, you can’t always have the home inspected, but you can bring knowledgeable experts with you to help you make wise decisions.
Of course, you’ll want to focus on buying homes that don’t need much work besides small things, like refinishing and repainting. Avoid buying properties that have mold or need electrical rewiring or roof replacements.
When estimating the cost for repairs, add another 20% to it, as these jobs almost always cost more than expected. From there, you can determine whether or not it’s worth it to flip a house.
Balance Repairs vs Market Value
To get the most out of your investment, you’ll want to purchase the worst house in a great neighborhood instead of the other way around. Because the property you’re interested in has the lower market value in the area, it’s almost guaranteed you’ll fetch a higher price when you sell, thanks to the higher market values of the surrounding homes.
A low market value isn’t the only thing you want to consider. Yes, you’ll want to fix the property up, but you need to know exactly where to stop.
If you don’t make enough repairs, you won’t get interested buyers, nor will you be able to charge a higher price. But if you invest too much into repairs, it’ll eat into your profits and it won’t be worth your time.
Make the Right Offer
As you’ve learned from the introduction, house flipping is hot. So if you’ve found a potential piece of property to flip, chances are, other people have their eyes on it too.
But just because you have competition doesn’t mean you should do everything in your power to outbid them. Before you even make an offer, sit down and figure out the maximum you’re willing to pay. Base this on the estimated repairs you need to make.
If your competition goes higher than your max price, don’t try to outbid them. In the end, it’s better to find something more affordable rather than bankrupt yourself on this fixer-upper.
Use These Financial Tips to Flip Houses Like a Pro
Flipping houses can be tough work, there’s no doubt about that. But with some background knowledge, you’ll be able to get your foot in the door in an easier fashion.
With enough time and experience, you’ll become a pro house flipper in no time. And as a result, you’ll be raking in money from these successful sales!
If you need more financial tips past flipping houses, then make sure you read the rest of our blog page!