Many real estate investors choose to make their money by flipping houses. In case you’re not familiar with the term, “flipping houses” refers to the act of purchasing, fixing, and then reselling a property at a price that nets a profit. This type of investing isn’t for everyone, but it can be a fun and challenging way to fund a better lifestyle and ensure a financially sound retirement. Below are five ways you can make money flipping houses.
MASTER THE SKILLS OF AN EXPERT HOUSE FLIPPER
Honing a couple of specific skills used by expert house flippers can make a huge difference in your bottom line. One of the two critical skills are to accurately estimate the cost of repairs. Since the whole point of flipping houses is to make a profit, you need to be able to estimate accurately how much it will cost to renovate the property. Being able to do this before purchasing the house gives you a good idea of what your profit will be when all is said and done. The other critical skill is to accurately assess the market value of a home. As an investor, you should learn early on how to run a Comparative Market Analysis (CMA) to get an accurate value of any home you’re interested in purchasing. This skill requires specific knowledge and practice to master.
CHOOSE THE RIGHT NEIGHBORHOOD TO INVEST IN
This is a highly important part of flipping houses, but sadly, it’s an area in which many inexperienced investors fail miserably. In order to get a good return on your investment, you need to understand the market trends in the neighborhood you’re looking to buy in. Important market data you should be looking at include how much other homes in the area are selling for, what market trends affect home prices in the area, and will the quality of the neighborhood pose challenges you’re not willing to deal with.
FIND THE RIGHT HOUSES TO FLIP
Not every house that’s for sale is suitable for flipping. It takes a bit of time and effort to find just the right property that will net you a profit. You can drive through neighborhoods looking for houses for sale, get referrals from trusted sources, use the MLS (multiple listing service), or you can advertise.
EVALUATE THE SITUATION
Once you’ve found a property with fix ‘n’ flip potential, it’s time to step back and evaluate the situation. Schedule a showing and bring your contractor along, if possible. Make sure you do the math, and then do it again to be sure you’ve figured in every possibility. To help you achieve the profit you desire, follow the 70 Percent Rule (pay only 70 percent of the After Repair Value (ARV) minus the cost of repairs).
KNOW WHEN TO WALK AWAY
You can inspect the home yourself, but without the aid of an expert home inspector, you may miss some problems that could ruin the entire deal. Things an expert will look for that you may be able to discover yourself include old electrical wiring, buried oil tanks, and dilapidated chimneys. Even if you don’t want to dish out the couple hundred dollars it’ll cost for an expert home inspection, it’s recommended you do to avoid repairs that could damage your profit margin.