Do you want to try property flipping? You’ve probably heard that this is a great way to make a lot of money quickly, but you’re not sure what it actually is.
The concept of property flipping is very simple: you buy a house, improve its value, and sell it for more than you paid for it.
It’s easy to find properties for sale in your area. However, it’s not as easy to know if you’ve found the right properties. You have to know what to look for. Some properties may look bad to the untrained eye but only require inexpensive cosmetic fixes to make them saleable. Others can look good, but require significant structural work that is expensive but won’t yield much return.
And you have to look beyond the property itself to be successful. You have to know how much a house could sell for where it is: you can fix practically anything about the house itself, but you can’t change its location. You also need a sense of where the market is going: up or down.
If you had the money to buy a house out-of-pocket, you wouldn’t need to flip properties in the first place. For most people, financing is not only necessary to buy properties, it’s desirable. Let other people’s money work for you. But this is also a common challenge: many people starting out don’t have the credit necessary to get financing just anywhere.
It’s important to figure out where you can go for funding, how to get the best terms, and how to secure funding without exposing yourself to too much risk. Finding the right funding solutions can make all the difference between making a profit or losing money on a property.
Sometimes, you can make money on a property just by buying and holding, but you usually have to fix a house up to make a profit. When you find a house, you should have a sense of what repairs will be required.
The more work you can do yourself, the lower your expenses and the higher your profit. However, you can also do more damage than help if you don’t know what you’re doing. Knowing what to fix yourself and what to hire someone for can make all the difference in your profitability.
As you develop connections, you can find reliable, inexpensive contractors or learn to trade labor with other flippers to save money and get quality work.
Flip or Fill
Now we come to the big question. Once you’ve fixed the house, should you flip it (sell it) or fill it (rent it)? Flipping a house is great if you need a lump of cash to pay off debts or invest in your next property. Filling a house with tenants helps you get a steady monthly income, and can help you build up your reserves before selling. This income can also help finance your next project.
Knowing which is best depends on knowing more than the current market price for a house. You need to know how the sale will impact your tax situation and have a sense of what the market will do in the immediate future. For filling a house, you need to know what to charge for rent and how to be a good landlord that can protect his house from the damage tenants might do. Finding the right tenants is crucial if you want to fill a house, and this becomes a critical skill you either need to master or outsource.
Ready to Make the Next Step?
Hopefully this rundown has given you a good sense of the basics of property flipping. Are you ready to take the next step and consider investing in your own properties? Connect with us to find out how to learn the critical skills for becoming successful at real estate investing (REI).