January 16th, 2015
You’ve probably watched the television shows. You’ve seen advertisements encouraging you to look into being a real estate investor. And you think you want to try being a home flipper yourself. It’s not as easy as it looks.
You have to be a solid risk taker to be a success. The goal of flipping a house is maximizing your profit and minimizing the time. And sometimes this can go horribly wrong. Entrepreneurs know that there will be pluses and minuses, and that they need to focus on keeping the pluses greater than the minuses. But they also accept the minuses and learn from them.
Before you start, find a good home inspector who is familiar with the neighborhood. They will know what little things to look for such as where mold commonly grows, or where the foundation often cracks. Make this person your best buddy since they’ll be able to tell you exactly what you need to fix up before you flip.
Your goal is to identify what must be improved to get the home into a sellable condition. So you will need to price out permits as well when doing your cost analysis. Then look at what changes are cost effective.
Avoid making major structural changes to the house unless you have a licensed contractor verify the wisdom and safety of those changes. If you were staying in the house, it might make sense to add on a room, but again, your goal is to maximize profits and minimize time. Major structural changes can be very costly as well as dangerous to the stability of the property. You don’t want to add on rooms and have the foundation crack.
At the same time you should salvage as much as possible within the existing structure. Flooring and paint are almost always required in a house flip but you do not always need new cabinets in the kitchen or bathroom. Often, new doors and hardware in the kitchen would be a great fix for drab and tired cabinetry while greatly impacting the overall look of the kitchen without draining your profits. Doors cost significantly less than making new cabinets and can add the appearance of custom cabinetry).
Look for homes that need visual updating. For example, if the walls have flocked avocado wallpaper and there’s still burnt orange carpeting, you may have a good flippable home. Most people buying homes have difficulty looking past cosmetic changes. And that’s where you have an opportunity as an investor.
Don’t look for homes that need major repairs such as new heating or plumbing when you’re just starting out.
Research and learn all you can. Assemble a solid team, and then look for a simple project to start. Learn your lessons and move on to the next one. In 2012, smart home flippers were earning on average $30,000 per home.
Are you thinking of trying to flip houses in your area?