Anyone who has watched HGTV has seen many shows where a couple or a team flip homes. They then will turn around and sell the home to make a profit. It seems like an excellent way to make money. However, a person needs to have a strong understanding of real estate to get started and the right connections and knowledge to know what to do. With that in mind, house flipping can become a sustainable career.
Defining Home Flipping
The art of home flipping is done by purchasing a house that is often in poor condition, repairing it, renovating it, and then selling it to make a profit. It has become profitable for many, and for some, it is their dream career. With a mix of real estate knowledge, the funds to the ability to remodel, anyone could become a home flipper.
Starting Home Flipping
A home flip is not as easy as some television shows make it out to be. There are several steps to take. It is not as simple as buying, renovating, and selling.
The first step is to do some research on the current housing market. Figure out where people want to live and look into the popular housing trends in that area. It may be a good idea to partner with a real estate agent since they can give a broader picture of the market conditions and the potential repairs in a home that will ultimately help with the sale. It is also essential to know the various class rankings that are used for neighborhoods. For example, Class A neighborhoods are the most popular, with the highest prices. Class B and C are considered more middle-class, and Class D neighborhoods are the poorest with the cheapest homes. Knowing the different classes will help determine how much money to invest in the flip.
A home flipper will also want to ensure they make a wise property investment before purchasing. Knowing what repairs may be necessary and how much those repairs may cost is reasonable. Time, as well as money, will need to be budgeted. Also, it is a good idea to prepare if something goes wrong during the renovations or if it takes longer than initially planned.
The next step is to find a home to buy. After all the research and preparations, finding the first home to flip is time. Once the perfect property comes up at a reasonable price, jump on it. Closing on a home can take anywhere from a week to a few months, depending on who they buy the home from. While waiting for the home to be closed, it is a good idea to get all the contractors ready to work on the remodel as soon as the closing is complete.
Once all the renovations are done, it is time to learn how to sell your house. This is the whole reason people flip homes, so they can resell them and gain a profit. When pricing the home, make sure it is competitive and look at what houses in the area are comparable to see how much they are selling for. Selling a home that has been recently flipped is what makes everything worth it in the end. Knowing that all the money and time put into the home was worth it.
Financing Home Flipping
Depending on the home and the extent of the renovations needed, the cost of flipping a home varies.
Before a home is purchased to flip, it is vital to ensure all of the finances are in order. If possible, buy the home in cash to avoid any debt or interest on the home during the renovations. If there is not enough cash, look into pooling the cash with friends and family or using various crowdfunding sites specific to getting a house flip funded. Banks usually do not offer mortgages to those who merely want to renovate the home and then sell it again since they want people to pay their mortgages off over a more extended period.
If cash is not an option, it is time to look into a few other financing options, such as what is known as a cash-out refinance, which is when equity is taken out on a current mortgage and refinanced to what is still owed. Another option is a home equity line of credit or a HELOC. This is a loan that will use the equity of a home as collateral. Finally, there is also an option for a hard money loan, a short-term loan from a private lender.
Timing Home Flipping
Another important factor when home flipping is to figure out how long the process could take. The amount of time it takes will determine how much of a profit a person will make.
The amount of time needed to buy a home to flip can vary from house to house. However, if a marketable home is found, it should be able to be purchased quickly. Because the best homes for flipping usually are not on the market long, it is vital to stay alert and keep a flexible schedule.
The time it takes to renovate a home also varies depending on the projects needed before it is ready to sell. Some homes require more work, so the remodel times can differ vastly. For example, if a person decides to do the renovations themselves, it could take a few months, but if they hire professionals, the time it takes could be cut in half.
Just like purchasing and renovating a home, it can also take time to sell the home once it is finished. The time it takes for a flipped home to sell depends on how much work is done on the house. To ease some of the burdens of putting the home on the market, it would be a good idea to hire a real estate agent to relieve some of that stress.
At the end of the day, flipping a home can be a rewarding and profitable career. It may not always be like the shows on HGTV, but it is still an exciting time.
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