If you’re just starting out in real estate and would like to know more about house flipping, then you’re definitely in the right place. And contrary to beliefs held by many people, you can easily get started flipping houses with little or no money.
All it needs is a little hard work, courage, and determination. House flipping may truly be your one big break but don’t dive in believing it’s all easy because most reality TV shows will make it look that way; buying an ugly house, fixing it up in a week and voila, you have a whopping $100,000 in profit after selling.
Rather than working with stories and TV shows, why not give it a try? However, as a beginner, you may be faced with a lot of challenging questions. Where do I begin? What must I know? What must I avoid? Am I doing the right thing?
This article will answer all your questions and remove any doubts you have because much as it may be a hard task getting started, there are many ways for you to do this rather easily.
Understanding House Flipping
Simply put, flipping houses is the practice of purchasing a property below its market value, renovating it and putting it out for sale in the market for a greater profit.
House flipping involves many factors including resolving liens, build out costs, marketing costs and holding costs. Starting a house flipping business not only requires you to put a little more effort but also to have a well-researched plan you can execute for fruitful results.
Different Ways to Flip a House
House flipping is entirely legal, and there are several different ways to do this. Moreover, even as a beginner, you can get started flipping houses with no money at all and whichever method works best, you can take thousands of dollars to the bank.
Strategy #1: Buying, Fixing, and Flipping
Let’s begin with the most common form used, the fix and flip method. This strategy involves purchasing a property at a lower price that needs repair, working on it to give it a whole new look, then selling it someone else who will live in the house.
This tried and true method works quite well and can easily give you a lot of profit on a single deal. However, this will greatly be influenced by the market and your ability to find bargains.
While it may be quite enticing, the challenge may be overpaying or underestimating repairs, therefore, be very conservative in your repair costs and the timeframe required to resell.
Strategy #2: Wholesale
Because the fix and flip method is quite popular, there are lots of investors looking for rehabs. Therefore, you can set out to buy a property cheaper then sell it to another investor for a few thousands more without working on any repairs.
This may be a good strategy if you’re starting out without money. Further, while you won’t be able to make a lot of money as the rehabber, you’ll be able to realize profit rather quickly.
Strategy #3: Scouting / Bird Dogging
A bird dog is an information gatherer who finds potential deals, sells information to an investor and collects money for the same. Bird Dogs have little experience and equally lack the knowledge or finances to flip a house.
They find a property for sale, gather all the necessary information including the name of the owner, their phone number and address then provide this information to an investor for a small fee. Many people often start out as scouts for other investors, and it can be an excellent way to make money while still learning and understanding the flipping business.
Moreover, you don’t need to have any cash to get started as a bird dog and equally you won’t incur any risk.
Strategy #4: Prehab
If you find a house that requires little work, you can sell it to a buyer in as-is condition. Prehabbing means you’ll need to clean up the property or just make a few repairs before putting it up for sale.
This method can work pretty well when dealing with houses within ‘transitioning’ neighborhoods but be sure to buy a property below market value so that you can easily sell it below the market value quite quickly while making sure you get a little cash from it as well.
How do you get started?
Well, rather than finding a house then figuring out what to do with it, it may be wise, to begin with, the end in mind. This way you’ll be able to tell what to do with a house once you find a motivated seller and buy it below the market value.
Assemble your Team
A great place to begin would be finding a mentor who is experienced enough and ready to advise you in the flipping business. They’ll help you find houses and how to make money flipping houses.
Aside from having a mentor, you’ll want to connect with people from different fields you’ll undoubtedly need such as plumbers, electricians, landscapers, bankers and general contractors. By doing this, you will earn great relationships that will ultimately be reliable and efficient.
Scope out the Market
You’ll need to have a good idea of what you’re getting yourself into regarding cost. Prices for houses vary considerably depending on the area. Therefore, market research is quite necessary. Learn how to find houses to flip by talking to real estate agents and visiting open houses to see the kinds of homes that are selling best.
Consider the price you’re willing to pay, how much you can afford and how much you can lose. Find out the after repair value of the house using sites like Zillow and Realtor. Compare the projected finished product to other houses to have a rough estimate.
Picking a property
As a beginner, you may bump into different kinds of properties some bad enough that won’t be worth your time. When choosing a house, consider its location, market value, the repairs needs, school districts and structural integrity. Of course, there are a lot more to put into consideration so be sure to find out more.
Determining you Maximum Offer
While different investors will use different formulas for any home flipping project, one way to decide on the amount to take home is working out the value of the home after it has been repaired and multiply it by 70%.
After finding the resulting figure, subtract the total cost estimated for all repairs to get the final sum you’re prepared to spend for a property. Say for example you find a house worth $300,000 and might require around 30,000 for repair; the offer price should be $180,000 so as to ensure you get an acceptable profit on your investment.
Word of Caution
House flipping isn’t all sunshine and lollipops. Equally, it isn’t such a hard field you wouldn’t be able to succeed. However, to get the most out of it, you’ll need to stay persistent and determined while working hard to penetrate the flipping market with ease.
Patience is key to everything and only time will tell whether you’ve made it or not so rather than throwing in the towel, keep working on improving your failures and equally maximizing your strengths.