Want to Fix and Flip Houses? 5 important tips to consider before moving into Home Flipping Business
July 10th, 2018
Flipping houses is an interesting business to be in but it requires commitment of time and efforts. It can be a full-fledged business but you will need to spend a considerable amount of time and put focus on the business. In this business, a small mistake can result in big consequences resulting in a cut to your profits or even to losses if you are not careful enough.
What exactly is House Flipping business?
Flipping is a term predominantly used in United States real estate sector. It is the process of purchasing a ‘’distressed’’ residential property, the ‘’redevelopment’’ and reselling of the same for a profit.
We often see some mid-level developers purchasing damaged or old homes at low prices, redeveloping them and then selling for good profits. In some cases, property brokers also engage in the home flipping business. As a home buyer, you can get involved in the flipping business provided you keep the following tips in mind –
Finding Good deals: Finding a good deal(s) or property is the first step to having a profitable venture in home flipping. You will either need a good team or the right network to get an idea of where you could find the right deals. Good deals can be found through home foreclosures, short sales, attorneys who are into property management and divorce cases (where the involved couple might need a quick sale to split the earnings). Sometimes, having a good network with banks or people dealing in foreclosures can help find the right deals which could later fetch healthy profits.
You will need to find a way to get in touch with the aforementioned stakeholders to get potential good deals. Such deals will help you obtain homes at low prices which after redevelopment can be sold for good profits.
Build the Pipeline: It is easy to get carried away with one good deal and spend a lot of time on its redevelopment and resale, in the long-run this will not help. Any good business needs continuity and home flipping is no exception. Putting time and efforts to find the relevant network or contacts and staying connected to them helps you find new deals and build a healthy pipeline. A healthy pipeline will bring in better opportunities for further deal closures and increase your business and profits.
Having the right team: Nothing is ever achieved without teamwork and this applies to the flipping business as well. You will need to have a good real estate agent to help you find great deals and keep on the constant lookout. A good contractor will help you rehabilitate and re-develop your current property with cost-effectiveness and in a timely manner. An attorney is always useful to ease the process of your business deals and also protect your business from both internal and external factors. A property manager is someone who will take care of your rental portfolio and ensure a smooth process. Finally, when you have got a good business portfolio, a good operations manager is your go-to-person as far as running the operations of your business while you can focus on business development. A good team will also help you find the right buyers as without the right buyers you will not be able to achieve business growth and profitability.
Dedication and Hard work: Without dedication and hard work nothing can be achieved. Whether you get into a home flipping full time or do it as a part time job, you will need to put sufficient amount of time into it. In case you have a full-time job, you should be prepared to put extra hours and the weekend towards home flipping because it requires an enormous amount of time and effort to successfully run the business. Another important thing is to have diligence at work, once you find a particular property, everything from closing the deal to securing finance to obtaining relevant permits can be time consuming and will require a lot of due diligence.
Balanced outlook: Any business needs a balanced outlook and proper way of handling things. In the case of home flipping, it is important for you to have a balanced portfolio, i.e., a balance between home flipping and renting. Home flipping isn’t easy since you will need to find good deals to churn out good profits and you may not end up with good deals all the time. Most successful home flippers undertake a few flipping deals and then reinvest the profits to purchase a property worthy of good rental income. This makes great business sense as much as it adds to your portfolio of business. Rental income facilitates a steady inflow of income on a regular basis that can not only take care of your personal expenses but also your basic business expenses. The secret here is – fix and flip homes but add balance through rental properties.
Home flipping can be a tough business to get into but can give you considerable profits. It requires your time, efforts, a lot of planning and of course the right network. Like any business, keeping the portfolio different i.e., not having all the eggs in one basket, can help you offset initial hiccups which sets you on the path to greater profits in the long-run. It goes without saying that a good team is what helps conduct efficient business and bring in better profits.