September 12, 2024
12:37 pm

How to Successfully Flip a House in Today’s Market

House flipping is when a real estate investor buys houses and then sells them for a profit. For a house to be considered a flip, it must be bought with the intention of quickly reselling. The time between the purchase and the sale often ranges from a couple of months up to a year.

There are two different types of house flipping:

An investor buys a property that has potential to increase in value with the right repairs and updates. After completing the work, they make money from selling the home for a much higher price than what they purchased it for. You may have also heard this called a “fix and flip.”
An investor buys a property in a market with rapidly rising home values. They make no updates, and after holding the property for a few months, they resell at a higher price and make a profit.

Is Flipping a House Profitable?

Done the right way, a house flip can be a great investment and incredibly profitable. In a short amount of time, you can make smart renovations and sell the house for much more than you paid for it.

If you decide to flip a house, you certainly don’t want to lose money. You want to make a wise investment and reap the rewards. That’s why a lot of people call in an appraiser to assess the value and then use something called the 70% rule to decide whether or not a fix and flip will pay out like they hope it will.

What Is the 70% Rule?

The 70% rule means you should only purchase a property to flip if its price—plus the amount you expect to spend on renovations and repairs—is 70% or less of what you think the house’s value will be when you resell it. This helps you avoid overspending on a property that’ll give you little return on your investment.u

How to flip a house: A step-by-step guide

Step 1. Set a budget

Flipping houses isn’t a get-rich-quick scheme. You’ll need to budget in advance to account for not only expected costs but also unwanted surprises, such as a change in the market and repairs that can take longer and cost more than anticipated.

When budgeting, many investors aim for the 70% rule. This rule states that you should only pay 70% of a home’s after-repair value (ARV) minus the cost of repairs.

Also, don’t rush into a deal without doing your due diligence. For example, if an inspection raises issues that could increase the renovation budget, be prepared to walk away or negotiate a lower price.

Step 2. Secure financing for the flip

Financing a house flip differs from getting a conventional mortgage since you’ll use the loan for an investment property and not as your primary residence.

While conventional loans may be an option, their eligibility and repayment requirements don’t always make them suitable for house flips.

Hard money loans from private lenders may be the best option for flipping homes. These are short-term loans whose main consideration isn’t necessarily your creditworthiness or down payment amount but your investment property’s ARV.

Step 3. Find the right house to flip

Target less expensive properties in desirable neighborhoods, such as those with top-rated schools or rising property values. Focus on homes that require only cosmetic repairs, like new floors, countertops, paint, and landscaping.

While properties with major issues, such as foundation damage or toxic materials, might be cheaper, they come with higher risks, costs, and renovation time.

There are several ways to find potential flipping opportunities:

Wholesalers: They often have contracts for properties needing work and can resell them quickly. Ensure you get proof of an inspection or conduct your own inspection before finalizing the deal.
Investor networking groups: Engage with experienced investors online through forums or attend in-person meetings. Networking can provide valuable insights and leads on potential investment opportunities.
Traditional real estate agents: Partnering with a realtor can help you find the best house-flipping opportunities. Realtors often have deep local market knowledge and can identify neighbourhoods or properties with high ROI potential.

Step 4. Plan the updates and repairs needed

Once you’ve purchased the property, your next task is assembling a contractor or subcontractor team.

Option 1. Hire a general contractor

Hiring a general contractor can be the least stressful option, especially if you lack renovation experience. The general contractor will manage the hiring of plumbers, electricians, carpenters, and other necessary trades. However, this means you have less control over the work and the selection of individual subcontractors.

Option 2. Act as your own contractor

This gives you full responsibility for hiring, vetting, and potentially firing subcontractors. While this approach offers more control and allows you to negotiate directly with each subcontractor, it involves significant work. If done correctly, you’ll build valuable connections for future projects.

In either case, ensure that a contract is signed before work begins. The contract should include a waiver preventing subcontractors from placing a lien on your property for non-payment, instead requiring mediation to resolve payment disputes.

Step 5. Begin renovation and redesign of the house

When renovations begin, prioritize addressing the most serious issues, such as structural problems, which are more likely to cause delays or lead to unexpected expenses. Save cosmetic fixes for last, as they’re generally more routine and less likely to cause major headaches.

Schedule regular meetings with your contractor or subcontractors to keep the work on schedule and within budget. During these meetings, review progress, discuss any deviations from the plan, and address any changes in cost estimates.

Also, remember to collaborate with architects, inspectors, and local building officials to ensure that all work complies with building codes and safety standards.

Once renovations are complete, conduct a final walkthrough. If any work seems incomplete or unsatisfactory, promptly address it with the contractor or subcontractor.

Step 6. Stage the home, put it on the market, and sell it

The final step is getting your property sold. You’ll need to decide whether to work with a real estate agent or try for sale by owner (FSBO).

While you’ll save money on realtor commissions with FSBO, homes sold with realtors tend to sell faster and for more money

A realtor can assist with getting your house ready for sale by helping with staging, listing, pricing, and showings. Because realtors often have a network of local buyers, they can potentially help you sell your property before it even needs to be listed. Realtors are also invaluable for negotiating a strong selling price and ensuring a smooth closing process.

Another advantage of using a realtor is adding a long-term member to your house-flipping team. Having a trusted agent to return to for each house flip saves you the stress of marketing and selling each property on your own. This lets you focus on finding and working on your next investment opportunity.

By following these steps, you can successfully navigate the process of selling a house that you recently flipped. It requires careful preparation, effective marketing, and skillful negotiation to secure a successful sale and maximize your return on investment.

The process of house flipping isn’t for everyone, but it can be a smart investment choice if you have the know-how. Get to know your local real estate market and partner with professionals you can trust. Always stick to a budget when flipping houses, so you don’t end up paying too much. With the right updates in every room, it’s easy to quickly flip a house to get a great ROI.

Discover a plethora of investment opportunities and luxuriant real estate ventures with Apex Group. Our trusted team of professionals is determined to deliver the finest services in an effort to remodel the property landscape of Pakistan.

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How to Successfully Flip a House in Today’s Market

Is Flipping a House Profitable?

What Is the 70% Rule?

How to flip a house: A step-by-step guide

Step 1. Set a budget

Step 2. Secure financing for the flip

Step 3. Find the right house to flip

Step 4. Plan the updates and repairs needed

Step 5. Begin renovation and redesign of the house

Step 6. Stage the home, put it on the market, and sell it

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