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House Flipping 101: What You Need To Know About Buying And Flipping A House

August 26, 2020

UPDATED 12/30/2020

Interested in flipping a house? There are a few things you should know. First of all, most traditional banks won’t give out a mortgage for a house flip. Instead, you’ll have to buy the property outright or get a hard money loan. These are short-term loans lent out at a higher interest rate just for this reason. Once you’ve secured property to flip, you’ll need to establish what you can do yourself and what you’ll need a general contractor to help you with. Hiring a contractor for home renovation is a good idea, especially if this is your first house flipping experience. You’ll know the work will be done properly, on time, and will come guaranteed. You can either hire a company or opt for independent contractor construction. Either way, it’s important to have the experts help you with your first and subsequent home renovations to make sure you also stay within your budget. For a list of local contractors and home improvement general contractors specifically, do a quick Internet search and read through the customer reviews to find the right contractor for your home renovation.

There are many real estate agents who have homes that you can buy and flip. Most of these homes are either bank owned or need fixing up. For this reason, the value of these kinds of homes would be lower. If you want to find ‘homes to own near me,’ you can search on house value sites such as zillow.com or other reputable real estate sites online.

general contractor

Owning these types of real estate properties allows you to accumulate wealth. The key is how to find a home to buy, which you can flip; after you fix it up to increase its value. After you fix up these distressed properties, you would sell them for a higher price and turn around and do the same thing over and over again. Now, if you are in the industry, when you get ready to flip the house how do you get listings as a real estate agent?

That would be the easiest part. Buying the home, fixing it, and flipping it would be the most challenging aspect of real estate flipping. But, it can be done. Many people are doing this and earning good income.

House renovating has become one of the biggest markets in the past few years. Just turn on HGTV and you’ll see by the wide variety of shows that it’s a market that is still steadily growing. With all of the inspirations and examples on TV, it’s no surprise that “house flipping” has become more and more common over the past few years as well. Homeowners are ready to take the examples they’ve seen on HGTV and turn the run-down house next door into a gorgeous new home that they can sell for a big profit. If you’re interested in investing in house flipping, there’s a lot you need to know to be prepared ahead of time. Here is a basic guide on all you need to know about the best way to buy and flip a house.

What Is “House Flipping”?

“House flipping” is a term used to describe the process of purchasing a property, renovating, and then selling it for more than was invested in it. Generally, the home is purchased purely to be renovated and resold, and the “flipper” doesn’t even live there. However, it has become more common now for people to buy a home and live there while they renovate so as to save themselves paying a mortgage on two homes. The goal is usually to buy low and then sell high, within months or a year of purchasing the property.

The Pros And Cons Of House Flipping

For people who have the skills and tools necessary to quickly flip a home, house flipping can be an extremely lucrative source of income. However, there are also serious risks or cons to consider when investing in house flipping. The best way to buy and flip a house is to be prepared ahead of time for the big decision you’re making. Here are the most common pros and cons of flipping a house.

house flipping

Pros

  • Depending on the current real estate market, you could make some serious money flipping a home.
  • The best way to buy and flip a house is to be prepared ahead of time. If you have the tools and skills necessary to do home renovations, you’ll save yourself a lot of money paying for professional labor and could even get the job done faster.
  • House flipping can be a full-time job or a side job as you work somewhere else. It’s flexible as there are generally no set in stone timelines or due dates.
  • Renovating a run-down home can have a big impact on the value of the neighborhood.

Cons

  • You never know when unexpected issues will arise. These could become very costly problems and quickly become a large financial loss.
  • If you don’t have a deep savings account or pool of funds to draw from when you start, you won’t be able to increase the value as much on the home, which means you won’t get as large a profit from the sale, and the sale could be more difficult.
  • Depending on the renovations you make and the location of the house, you could have a hard time selling, which means you would be stuck paying for two mortgages for a longer time than you anticipated.
  • Once you have renovated and fixed up a property, the city could increase your property taxes. This would mean that while you are waiting to sell the home, you’ll end up spending more money.

What To Consider Before Investing In House Flipping

Besides the basic pros and cons of flipping a house, there are a few other things you should consider about yourself and your connections. More than 30% of remodeling jobs include the entire home, so you’ll need to be prepared for a big project. A common mistake people make when they go into a house flipping project is thinking they can handle it on their own or with a few friends there to help. The best way to buy and flip a house is to do so with the right team. Whether that’s rounding up friends with handy skills, such as electrical installation or landscaping abilities, find the people that will help you have the most success.

You will also need to consider your financial situation before you jump into a house flipping investment. The best way to buy and flip a house is to do so with cash savings, to save yourself getting into debt or paying more due to interest. However, most people don’t have enough savings to buy a house outright and will need the assistance of loans or lines of credit. There are quite a few options house flippers could consider; home equity loans, home equity lines of credit, personal loans, or even construction loans. Make sure you have done serious research to find the best option with the lowest interest rate and loan terms.

As you prepare to flip a home, you also need to think about home insurance. The last thing you want is to put your money into a project and then lose it if there is a disaster with the house. General homeowners insurance won’t cut it for a house flipping project. You will need a special type of insurance based on where you are in the project. You could look into a builder’s risk policy, vacant home insurance, liability insurance, or dwelling policy.

Finding A Property

Once you have decided that the pros outweigh the cons and you’re financially prepared to invest in house flipping, the next step is to actually find a property. This is another area where you shouldn’t jump right into a purchase. You need to take some time to watch trends and figure out how long they are listed, how many times prices are adjusted, and the size and area where the most demand tends to be. You may also consider networking with some local realtors to see what it is people are looking for, what features tend to be the biggest draw. Maybe it’s hardwood flooring, maybe it’s big windows letting in a lot of natural lighting. Knowing this will give you ideas on what elements to add during the renovation process.

Another great idea is to look for unique and desirable elements that already exist in houses. For example, an old house that’s been neglected but has beautiful bay windows can have a lot of potential. The key is to look for that potential. Typical home buyers won’t see it, but someone going into a purchase with the intent to make serious changes will.

The Renovation Process

Now to the fun part, the actual renovation. The mistake many house flippers make when they go into their first house flipping project is to overdo it. They go in “guns-a-blazing” ready to rip down everything and make an entirely new house. That passion is admirable but it will ultimately lead to stress and potentially less profit in the end. The best way to buy and flip a house and get the most profit is to not over-renovate. Only spend your money on upgrades that will add value to the home. For example, having plumbing services done will add great value to a home. The buyers will have the peace of mind in knowing there won’t be unseen issues there and you can list that on the house listing. Heated flooring in a bathroom is a fun feature to have, but ultimately it won’t sell a home. Your key is to add value to the house at the lowest cost to you.

If you’re wondering what the best projects are to get a high return on investment here are some you should consider:

Kitchen Renovation

A kitchen renovation is a project that will get you the highest return in investment and greatly increase the value of the house you’re flipping. The kitchen is one of the main focal points in a home, a place where friends and family gather, and homebuyers are looking for a space that fits that. It would be wise to focus your time on really transforming the kitchen space in the home you’re flipping.

If the kitchen comes with appliances already installed, make sure they’re in top working shape. You may consider  hiring an appliance repair company to fix any issues. You may also consider replacing outdated appliances that don’t match the new look of the kitchen. When you’re trying to figure out the best way to buy and flip a house, focusing on the kitchen is crucial.

Replace Doors And Windows

Another important part of figuring out the best way to buy and flip a house is recognizing where you can make eco-friendly changes. Many homebuyers are looking for a way to have a positive impact on the environment and also save money on utilities. Installing new doors and windows that are environmentally friendly will add a lot of value to the house you’re flipping. You could also consider repairing any seals around windows or doors that are not working well. However, there are quite a few options you can consider for replacements.

If the house has a garage, don’t forget that door as well. House flippers can often forget the impact a good seal and working garage door can have on the look and functionality of the garage. Make sure to perform garage door services on the track and motor to ensure it’s working well. The last thing you want is a potential homebuyer to open the garage during a house tour and be met with loud clangs and squeaks from an old, un-oiled track.

Fix Major Systems

As you’re deciding on projects that will be well worth your time and money, don’t forget the major home systems. If a potential homebuyer looks at a house listing and sees that the HVAC system was recently replaced or repaired, that will add a lot of value in their eyes. Knowing that they won’t have to pay for HVAC maintenance or repairs shortly will draw them towards your house being a very viable option.

Add To The Curb Appeal

The curb appeal is extremely important when you’re figuring out the best way to buy and flip a house. It’s the first thing potential homebuyers will see when they look at a house listing or visit the home for a tour. As you work on renovating the home, make sure that you have really worked on fixing up the exterior of the home. From gutter cleaning to ensure there isn’t moss and leaves dirtying up the appearance, to a fresh coat of paint on the siding or shutters, even small changes can go a long way for the look of the house.

You should also put some time into improving the landscaping around the house. Plant some new shrubs or flowers around the perimeter of the home to liven it up. Ensure that shrub and tree maintenance has been performed to make everything look clean and well kept. You may also consider planting new sod or scattering grass seed around when you are at the start of the project so that bare spots can fill in over the months you are doing renovations.

In Conclusion

Figuring out the best way to buy and flip a house can be a long process, not to mention the actual renovation and selling time. If you take the time to prepare ahead by considering the pros and cons, preparing your team and financials, and being meticulous about the renovation, you should be able to successfully flip the property you purchase. Best of luck to you as you flip your house.

Finding accurate real estate listings is possible, but many of the real estate listings that are publicly accessible are at least somewhat incomplete. People who want to acquire houses for sale should often conduct at least some of their own research. It’s a good idea to use a number of different sources, of course. However, the people who are looking for a house for sale may get better results if they try to ask questions themselves.

Looking for a realtor near me can help anyone who is searching for a house. Real estate professionals may be familiar with houses that have not even been officially listed yet. They are certainly very familiar with a number of very different local houses and properties. Realtors can help people learn more about the active houses for sale. They can also potentially introduce people to some of the other bargains.

Still, when people look for a realtor, they’re either the sellers or the buyers. Real estate professionals can help people either way. Finding a way to sell a house effectively can be particularly challenging. However, both of these processes have their own associated challenges. Some people will only buy or sell a house on one occasion throughout their entire lives, but that won’t be the case for everyone.

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