Home flipping or real estate flipping is an old revenue-generating strategy. It involves the purchase of land or property, its development through construction of infrastructure or repairs made on the building and the resale at a much higher price; buy, fix and flip real estate.
Before an individual decides to get into the business of home renovation and development, he must ensure that he is ready for what lies ahead. As with every endeavor, going into real estate development involves a vision, planning and ability to overcome challenges.
Before dipping your hands into the industry, you must first study the sector and get as much information available. It would be advisable to start part-time at first and grow your business from there, as you continue to learn more about flipping property and other aspects of real estate development.
Remember that the idea is to buy low or at an affordable price and sell the property at a profit. To be able to do this, you should be familiar with the real estate market. How much is low and how much is high? What kind of property would be sold faster?
Many of those already making a profit in fixer-uppers and flipping would most likely suggest that you start networking with other real estate professionals, especially brokers who can teach you a thing or two about prices and location.
Attend workshops, forums, and events where you meet these people. And not just real estate professionals but also contractors and other people who would help you do home renovation and turn properties around.
Once you’ve met your prospective team – one way or another you will have to bring together a group of people to help you in the flipping business — you must then brainstorm on where to get the funds to buy your very first property.
Some people use their own savings as capital while others rely on loans.
If you don’t have enough capital to buy land or property, you can try borrowing from friends or relatives. You can even turn them into business partners and bring them with you whenever you embark on a renovation project. Or if you are willing to, you can borrow from a bank and include the finance interests in the overall costs.
You may want to start small for your first development project. Among the best buys would be foreclosed houses sold at very low prices. Buy one, preferably in a saleable area, and start the home renovation to see what repairs are needed.
By this time, you should already have a broker or real estate professional in your team who can help you identify a potential property. They will be the most knowledgeable on what areas are good for home flipping.
Nowadays, lists of houses for sale are available from brokerages and banks that also do their own repairs, detailing the condition of the houses in their reports. Banks often offer foreclosed houses. Always be on the lookout for such events, published or announced through newspapers or websites.
Experienced brokers will also be able to help anticipate sales and later on help you sell you repaired or developed property.
When you are going through the home inspection process, be sure to bring your broker and contractor to the property. They must see the place first so they can give an estimate on how much it should sell when repaired and how much the repairs or renovations will cost (be sure to include an inspection of the home foundation). This must be carefully factored in your computations.
Once finished with the inspection, analyze the deal first before giving the green light for the renovation or repairs. First list your total acquisition cost including the closing costs. Then factor in the estimated cost of repairs. Definitely, the sale price should be higher than the two combined. Don’t forget to factor in the commission of your broker, as well as the interests to be paid for the loans.
After you come up with the final amount including your preferred profit, check if it matches or is still within the price range of similar properties in the market. You should always do this before buying the property and again after you have completed the home repairs.
As a businessman, you should be hands-on, especially in the rehabilitation process of the structure. You are still the one in command, directing your contractor what repairs to do and how much to spend.
The initial inspection checklist should have helped you get an idea how long the renovations will take to complete. Watch how your workers manage time. Check if the quality is within your standards. Make sure your contractor is not wasting your precious time and money.
Finally, when everything is done, sell your property. Again, ask the help of your broker and have him invite prospective clients for a home inspection. Don’t settle with an average selling price. Always aim high. If your calculations were correct upfront, you should have a very nice net profit. Buy it, fix it, sell it: Profit!
Related: 5 Fixer Upper Tips