Flipping houses is the most popular real estate trick used to make money. The process for flipping a property involves three key steps- buying a property, renovating it, and selling it for a profit. Each of the three steps requires a great amount of research, great +analytical capabilities, and a good instinct.
Flipping houses is not a child’s play but if done correctly, the profit margins are huge. You can earn profits of up to 50% on selling a single house. There are just a few things that you will need to take into account. In this article, we are going to discuss just that, how you can make money by flipping houses.
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Find the Right Locality to Invest in
The first and the most crucial step is to familiarize yourself with the market that you want to invest in. One of the best methods for that is to look at the property sales in the area for the last 6 months. Find out the number of houses listed to be sold in the area, calculate the average number of houses sold every month in the area, make a note of the average price of properties, check the cost of repairs, and calculate your profit margins.
Another thing that you must keep in mind is to look out for the various market trends in the locality. Check out various blogs, newspaper articles, talk to some real estate experts and take their advice. See where the prices are headed in the next couple of years.
For instance, let’s say that there is a new school that is being built in the nearby area. This will mean that employment will increase in that area and therefore, there will be a rise in the demand for housing properties. A rise in demand is directly proportional to an increase in the price.
You must keep a tab of all these modifications.
Pick The Property that Meets Your Flipping Houses Requirements
Once you are done selecting the right neighborhood, start hunting houses in that area. Although there is no one way to find the perfect house, a good way to start is by seeking recommendations from your network. Word-of-mouth is the strongest marketing strategy ever known and there are good reasons for that.
Seeking expert opinion is always the best way, but you must also interact with the occupants of an area for some insider insights. Another thing that you must take into consideration is the margins for profit. It is recommended to look for properties in poor conditions. You can bargain your way into buying for far less than the market value of the house.
Certain studies indicate that it is always cheaper to reach directly to the owner rather than opting to buy the property through an intermediary. You may reach them up-front or can fix an appointment by calling or by means of mail.
Analyze The Property Deal and Flipping Houses Property
Remember that your ultimate aim is not to own the property but to sell it and make profits out of that sale. Therefore, you must always assess a property deal based upon the profit principle.
While looking at the price and the profit potential, always take into consideration the cost of repair. Also, do not neglect the cost of a mortgage as it is a heavy expense and should not get out of your profit.
A good way to do this is to estimate the after renovation value of your property. For this, you musty do some research and should look for houses in the locality that were sold in the last six months and were similar in size and condition to your property after the planned renovation.
This step will help you in determining how much you can expect to earn out of the sale of that property. If the profit looks promising after taking out the repair and mortgage costs, the flipping houses deal is a promising one.
Build a Network of Professionals
When it comes to the business of flipping houses, you will need the assistance of multiple professionals at every point of the deal. For starters, you will need to seek assistance from realtors and real estate experts on the value of the property. You will also need to hire home inspectors, contractors, etc.
It is advisable that you start building a strong and expert network of real estate professionals who can assist you in all your real estate deals.
Seal The Flipping Houses Deal
After you are done inspecting and evaluating the deal, make your offer. You will probably need to do some bargaining and pitch your deal in a convincing and persuasive manner.
It is easier to finalize the deals of old houses as these sellers are in a hurry to get rid of the property and generally do not bargain much. This can work in your favor and you can get the property at a far lesser price than its actual value.
Repair The House for Flipping
No buyer will buy a house for a good price if it is not in a liveable condition. Moreover, most buyers are looking for a house that is ready to move in.
Thus, in order to earn a good profit on your flipping houses deal, you must start repairing and renovating the house. Also, make sure that the renovations do not consume a long period of time. Because the attached mortgage cost in this case will eat a huge chunk of your profit.
You can also think of expanding the house, whenever possible. It has been found that a five-bedroom 7000 square feet house sells at a much higher price as compared to a three-bedroom 7000 square feet house. You will need to be very analytical and calculative with your renovation plans.
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Sell The Property
The last step in the process of flipping houses is to list the property for selling, find a buyer who is willing to pay a good price for the housing property, close the deal and enjoy your profits.
Although, it is not very difficult to sell housing properties as the housing market is generally hot. People are always looking to move to a better and bigger neighbourhood.
The key is to find a quality buyer who is willing to buy the property fast and at a very good value. This will ensure a lucrative profit for all the hard work and money that you have spent on your housing deal.
Do not lose a lot of time in closing the selling deal as the mortgage costs and the maintenance costs will still be heavy on your pocket.
As soon as you find a buyer, sell the property readily, earn your profit and move on to your next flipping houses deal.
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Takeaway
Although an attractive and lucrative business, flipping houses is not an easy deal. You have to manage a lot of things and need to take care of multiple things at once.
You have to find the righty locality, look for a property that offers huge profit margins, finalise and assess the property deal, take into consideration the various mortgage and repair costs, repair and renovate the property in a short period of time, look for a prospective buyer who is willing to pay a good price, finalise the deal and sale the property.
Each of these steps involve multiple sub-steps of their own. However, besides all the hassle involved, the flipping housing deals prove to be promising and offer huge profit prospects.
If done correctly, they can fetch you profits as high as 50%. Take care of a few basic things, build a strong professional network, be very observant, analyse carefully, follow your business instinct and you are good to go.
You might also like to explore below external contents on homeownership:
- What is Leverage in Real Estate
- What Is Wholesaling Real Estate ?
- How To Identify A Real Estate Investing Mentor
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