Don’t let yourself be fooled by TV shows: house flipping is nothing like your everyday limited-scope renovation project; it actually involves careful planning, collaboration with contractors and tons of hard work. Depending on the original state of the house, you may make a fortune through the flip – but you can also lose it as easily. In case you’re new to the concept of house-flipping and are in two minds as to whether the project truly can pay off, we have several useful guidelines here to help you through to your first successful and financially rewarding “fix and flip”.
Plan the Flip Carefully: Not All Deals are Winners
Before you go in wielding demolition hammers and power drills, carefully examine the entire estate and identify weak spots in the living area, basement, attic and backyard. The rule of thumb with fix and flip projects: the pricier the home, the greater the risk – but higher the profits as well. In more expensive houses, your investment would not be wasted completely and you’d still be able to make a decent return even in case a major unforeseen mishap occurred during the overhaul. Make a list of household issues in need of repair, do the math and see whether the deal pays off based on your personal profit target – just make sure you’re 100% realistic about your financial expectations too.
Figures Done Right: Get what you Want at the Best Price
One important aspect of house flipping is the initial real estate price. When looking for a place to fix and flip, keep an eye out for real estate owners who need a quick and easy sale more than an extra figure or two on the sales contract. Homeowners in this category are often willing to sell below market value because of financial problems, job transfers, unemployment, divorce and similar reasons. When inspecting the house for flipping, pay attention to the overall property structure because extensive projects such as foundation repairs and roof replacement don’t hold any market value while they do require substantial investments. But for small repairs you can call an expert like Precision Roofing Inc to make your repairs.
Shop Around: Best Value for the Money
Once you find the house for the makeover and complete the paperwork, you should go window shopping and price comparing. Remember: a slapdash start is never a good one, especially in a fix and flip. This is particularly true regarding the choice of contractors and major furnishing elements: quality and durability come at a price. Still, the market is generous enough, and with a bit of search and luck, you’ll be able to get exactly the service and items you need at an affordable outlay. You can always sit down with a private contractor and negotiate the deal instead of agreeing to the first sum they call – this trick should save you enough for better furniture, wall paint and similar investments.
Watch Out: Potential Pitfalls of House Flips
Taxes may pose a potential problem in house-flipping. Any property held under 12 months is liable to taxation based on the rates for regular sources of income. However, if you hold on to the real estate for over 24 months, the rates go down a notch, increasing your final profit. Another possible complication may be the quest for the right contractors who do decent work for a reasonable price – a marginal renovation number done by fix-uppers may cost you more than you expected unless you manage to sell the property soon. Then there’s the initial purchase funding: if you don’t have the capital in your back pocket right off, be very cautious whom you borrow the money from and cross-compare interest rates meticulously. Also, be realistic with the final figure expectations and don’t forget that the bottom-line profit will be decreased by the house purchase value, repair and flip costs and real estate commission, insurance, loan interest, taxes and utilities. If necessary, consult the Think Conveyancing team for a reliable valuation of the property before and after the overhaul.
House-flip projects are a fun and rewarding way to earn money fast – just make sure you take into account the overall investment, real estate market situation and a few potential complications that may call for additional funds. Ready, steady, go! If you’re ready to take risks, you can become a realtor in no time.