Investors flipped more than 200,000 homes in 2017, reaching an 11-year high. Flipping continues to be a popular option for real estate investors who want to make profits quickly. Here are a few things you should know about house flipping. It may be a good option for your investment portfolio!
Two Types of Flipping
You might not realize this, but there are two options for flipping homes. The first is the most common. You buy a home that needs repairs and updates, renovate and update the home and then put it back on the market. If this is done correctly, you can make a large profit in a short period of time. For this to work, you need to find a good deal on the home and stay within your repair budget. Otherwise, it can be difficult to turn a profit.
The second type doesn’t require repairs. You can buy a home that’s located in a market where prices are going up rapidly. You keep the property for a few months and wait for the market to work in your favour. When the market is hot, you list it and sell for a profit.
Paying for the House
If you find a house that you want to flip, you need to determine how you’ll go about purchasing it. Keep in mind that traditional lenders have the best rates for real estate transactions, but they will want a minimum of 25% downpayment. You can also turn to hard money lenders to obtain funds to flip the house. Though keep in mind that interest is high with hard money lenders. Many charges 15% or more to finance a real estate transition, and you’ll need to pay the money back much more quickly than normal.
If possible, it is best to buy these homes with cash. Many people cannot do that until they have several successful flips under their belts, though it’s what many house flippers end up doing so they don’t lose any more money to lenders.
Rehabbing the House
It’s important to remember you aren’t trying to create your own dream home with the house flip. You want to increase the value, but don’t go all out with expensive time-consuming updates or unnecessary renovations. Minor, affordable modifications are helpful when flipping a home. Completely remodelling a kitchen or a bathroom won’t likely provide the return on investment – keep it simple and rely on staging while showing the space.
Selling the House
Once the house is ready to sell, you have to list and unload quickly. If you don’t make repairs, you’ll likely sell within a few months. If you do make repairs, you’ll keep the house longer to make the necessary changes, but make sure you can sell it within a year or less.
Are You Ready to Flip?
Like any other real estate investment, you need to do your homework before flipping a home. You can make money off a flip, but it’s not easy money. It takes lots of research and hard work to be successful in this type of business. Take your time before moving on flippable property, expensive unexpected costs can make or break you!