Flipping investment properties is now just not for the expert but amateurs and novices are getting involved in buying up great deals, flipping them for a profit or renting them out for monthly cash flow income. Whether you’ve done it before and you have a little bit of experience or this is your first time preparing, researching and planning out your investment strategy, there are some do’s and don’ts of flipping houses that it’s important to be aware of.
With shows like Flip or Flop, Fixer Upper, and other real estate investment shows, many people think they are experts at it and want to jump in right away. The problem with that is that most of those shows are staged, set up, and rehearsed. Not every home yields a high return on their investment but with a little bit of research, knowledge and having a great team assist you in the purchase and sale of the property, chances are you’ll make some great decisions.
Here are some do’s and don’ts if you’re planning on flipping a house.
Do hire the right team. Before you invest you want your team in place to look at a house, help you purchase the house, and have contractors ready to give you advice, pricing, and a plan of attack on the house. If you have no idea where to start, you probably shouldn’t be looking at houses just yet.
Have a great real estate team that understands your budget and the type of house you wanting to buy, and inspector on standby ready to give you the true nitty-gritty of the house, and a contractor to give you pricing and projections on what the house will actually need.
Do secure your financing ahead of time. Whether you are planning on buying the house with cash or financing, have this ready to go with the right house hits the market. Whether it’s an auction house, foreclosure or just a great deal, you don’t want to be scrambling for financing at the last minute.
Do start small. If this is your first time flipping a house don’t go big the first time. Biting off more than you can chew will only cost you stress, finances and possibly your profits. Start small with something that you can manage easily, flip it for a great profit and then you’ll have the experience to do it again.
Don’t ignore red flags. This is where your contractor and inspector will come in handy. Anything that screams a ton of money you should probably just walk away from. This includes mold, asbestos, major foundation issues or water damage. Some of these items may be small and easy to fix while others may be an entirely huge can of worms you just don’t want to deal with.
Do trust your real estate agent when it comes to the market, the house and the neighborhood. Your real estate agent knows what house to buy and when. You don’t want to buy the best house in the worst neighborhood; you want to buy the worst house in the best neighborhood to bring your profits up as much is possible. If you have the nicest house on the block, you’re not to get the profit out of it that you want.
Do be careful of your budget. It can be very easy to blow your budget halfway into the project. Make sure you’ve budgeted out for every step of the process and added a little extra for those unknown items that you don’t know about until you start tearing down walls or opening the floor.
Do know your limits. Some of the items and tasks you may be able to tackle on your own but it might be more cost efficient to have someone else do it that can do it quicker and easier. Know your limits when it comes to your own contractor work and when it’s time to hire out.
Don’t get caught up in auctions in the buying process. It can be really exciting to get involved in the auction process but if the house is really not what you want, don’t let your emotions overtake reality and practicality. Think about how much the home would actually sell for once you fix it up and how much money you’re going to put into it. If the home is $300,000 and you’re going to put $50,000 into it but can turn around and sell it for $400,000, chances are you’ll probably make a profit. If you could only sell it for around $350,000-$360,000, it may not be worth putting in that much money.
Finding the right house takes a great team, patience, and understanding your budget and your limits. Our real estate agents specifically help investors throughout Northern Virginia, Washington DC and Maryland throughout several of our offices. For a specific real estate agent that deals in flipping properties contact one of our offices today. We’d love to put you in touch with that agent so that you can make a well-informed decision on your next flipped property.