words Alexa Wang
Have you ever heard of house flipping? If you have, then you already know how lucrative the business can be. This process usually involves buying old houses at low price points, renovating them, then selling them to make large profits.
It might sound easy right now, but once you get into the actual process of flipping, it will get pretty complicated. It’s not something that you should do without having prior knowledge of the whole process, a good budget, and certain skills. To help you do this, these following points will help you out.
Know the Risks
Flipper’s job usually involves a high chance of risk. When you’re buying a house for $150,000, for example, you’ll have to pay another couple of thousands of dollars for renovations. Imagine the loss you’ll get if no one wants to buy that house after all that money you’ve invested in it. Add to that the home insurance expenses, utilities, maintenance, property taxes, and so on.
When you finally find a buyer, you won’t get much profit. Although the average profit for house flipping in 2017 was estimated at $66,448, a number that exceeds the yearly income of many people, a lot of people who don’t know the basics of flipping will be tempted to try it out, unaware of the fact that they’d have to go through a few losses first before making huge profits.
One way to find out whether or not you qualify for house flipping is through your credit score. Simply put, you must have an excellent credit score to carry out this job effectively and make huge profits. Flippers buy houses and renovate them after they make the purchase, which means that they’ll need a lot of cash.
Alternatively, if you don’t have this kind of money, you can consider taking out a loan. Since lending measures are more restrictive than they used to be, you’ll need to have the best credit score to get the loan you need at the lowest interest rate, and if you take the right steps, you’ll be able to carry out the process of flipping houses at ease. To know your credit score, you can check your credit reports at any of the three national credit companies: Equifax, Experian, and TransUnion.
Choose an Excellent Location
It’s important that you choose houses that are only located in a desirable neighborhood, as this will affect your profits significantly. While you have control over how much work you can do on the house, you’ll never be able to control external factors such as the neighborhood security risks. To start your house hunt, make sure that you research local neighborhoods, especially locations with rising real estate sales. If there is a large number of sales in the neighborhood, this might be a sign that a crime has occurred, so make sure to ask around the neighborhood first before purchasing the house.
Home renovation projects are usually filled with nasty surprises that can cost you a couple of thousands of dollars. You might even be facing structural issues that can’t be fixed with renovations. In order to avoid that, make sure that you look for homes with sound structure and foundation, especially if the house you’re about to buy is an old one.
You may even want to bring someone who’s knowledgeable about electric and plumbing systems when you do a home inspection. Make sure to check for mold, cracks, and pest infestation for extra safety. Homes that need only small changes, such as changing kitchen cabinets, painting, or carpeting, will work best for you, especially if you’re a beginner.
Gather a Team of Experts
As tempting as going alone would be, gathering a team of experts is a crucial part of flipping houses successfully. A real estate agent, for example, will be knowledgeable about things that you’re not, so you must have one at your side, especially when you’re doing a house inspection. You’ll also need a lawyer to walk you through the laws and regulations that come along with house flipping.
An insurance agent is going to be an important part of your team, especially in your first few months of being a house flipper. In case something goes wrong during this process, an insurance agent will tell you how to protect yourself. Finally, you’ll need a title company, which will offer title insurance and ensure that your piece of the estate is legitimate.
Now that you know the steps of getting into house flipping, you can safely make a profit from this process without having to worry about future losses. Make sure that you do enough research when choosing or renovating a house. You should also look for house pricing on the market to know how much profit you’ll make out of selling a particular house.