House flipping has become increasingly more popular over the past few years. Thanks to home renovation programs that show the potential profits house flippers can earn, more and more real estate investors are jumping in. But being successful with house flipping takes a lot more business savvy than most people realize. So before you buy your first house to flip, keep these three important tips in mind.
1. Do your market research before you buy a house.
Just because a house is priced very low doesn’t mean it’s a good investment. You want to buy a house in an area where houses are selling quickly. Therefore, research home sales trends in various areas. Find out what the average home sales price is in each area and how long houses typically sit on the market. Make sure the area is attractive to home buyers. Buying a home in a neighborhood that is mostly rental properties may not be appealing to potential home buyers.
2. Know the exact renovation costs.
When looking at potential properties to flip, come with a notebook, pencil, and tape measure. Write down in detail what renovations you plan to do in each room. Don’t rely on your memory. Take photos if necessary (ask your Realtor if taking photos is allowed, especially if the home is currently occupied). Measure rooms so you can accurately figure costs for things like paint and flooring. Then, before you make an offer, talk with contractors or suppliers to find out the exact costs of your materials and labor. Don’t guess! If you guess, chances are high that you will significantly underprice the renovations and then get a surprise bill later.
3. Hire professionals as needed.
In house flipping, time is money. While it’s great to think you can do many of the renovations yourself, be realistic about your abilities and time commitments. If you’ve never installed a new kitchen before, now might not be the best time to start. However, if you’re adept at painting, then by all means do the work yourself. Know your true capabilities. If you attempt something you’re not familiar with, it may end up taking way longer than needed (and cost a lot more money in the long run). It’s best to hire the professionals you need in the beginning so the job can proceed on schedule and be done correctly the first time.
House flipping is certainly a great way to earn profits as a real estate investor. Just remember it’s not always as glamorous as television portrays it. It’s a true business that requires diligence, research, and patience. When done right, though, you’ll find there are plenty of profits to be made.
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