The Basics of House Flipping
Tips for First Time Investors
With a bi-polar stock market, and nearly immeasurable returns in traditional savings, everyone can be motivated to love real estate. A buyer’s market permeates most housing markets. And do-it-yourself magazines and television shows have made home repair seem like a glamorous hobby rather than the overwhelming mystery that used to exist.
Flipping can be an exciting hands-on investment. After all, there is a reason there are no shows about mutual funds. But before you call in the film crew, consider these tips to make your flipping adventure a successful and fun investment:
Be Realistic
House flipping looks good on paper, and sounds great on Saturday HGTV programming. But for every hour of well-edited television, there are days of frustration associated with a typical flip. You will inevitably find broken plumbing, unsafe wiring, or mold hiding under floors and in walls. Professionals will be unavailable, or regulatory issues will crop up. These unexpected issues cause expensive delays. Prepare yourself to be flexible before you buy.
Be Realistic: Know your assets
Like buying stocks, you must be aware of what you are prepared to invest. Obviously, know your budget. But also consider the time commitment that you can responsibly make. Be realistic about your competency in buying, designing, repair, purchasing, and marketing your property. Can you efficiently replace the bathroom sink? Or should you hire a plumber? Will you have time to be a landlord if the house does not sell quickly? Knowing the resources you can responsibly contribute will help you effectively identify your perfect investment.
Be Realistic: Know your goals
Are you in it for the short-term? Or long-haul? Will you be satisfied with a 2 per cent return? Or will you demand a 15 per cent return? Can you wait for the perfect buyer? What does your ideal tenant look like? What do you want to contribute? What do you expect from professionals hired to help? What is your timeline to market? Setting realistic goals before you invest will prevent buyer’s remorse after the deal is done.
Be Realistic: Know your market
Buy low, sell high. It seems so easy! But successful flipping requires the ideal opportunity. You aren’t just buying into a property, you’re buying into a neighborhood. Get to know your ideal buyer. Find those neighborhoods that are attractive to potential buyers or tenants. Become familiar with those things that will help sell your property, like respected schools and popular parks. Learning your market will help you choose a property that can be improved to achieve your investment goals.
Identify Professional Help
Although psychiatrists are not necessarily required, positive professional relationships will help you maintain your sanity throughout your flip. First, find a realtor that you trust. Consider a home inspection service or hire a contractor to help identify areas of repair before you buy, so you can maintain your budget. Identify subcontractors and vendors to handle those jobs you cannot or don’t want to handle. Seek feedback on the design expectations that will maximize your value. Talk with your attorney and tax advisor to learn procedural and tax pitfalls. Be clear about your expectations on the front end. Ask friends and colleagues for recommendations.
Have fun
Unlike stocks and bonds, real estate gives you a chance to contribute to your own investment. Plant shrubbery and paint the porch. Hang out with your contractor. Learn how to install tile and crown molding for future flips.
Taken seriously, flipping real estate can be a lucrative and enjoyable investment. Take advantage of these tips, and you too can love real estate!