Money is the one thing that you need when flipping houses. If you’re successful, it’s also one thing that you will get a lot of in the end.
Because money is a key component in your real estate investment, you need to know how to handle it properly. Whether you will tap your personal finances or get help from financing institutions, there are a number of things that you need to know.
Take a note of these different tips to get a better handle on your finances and profit from flipping houses.
1. Take care of your finances
Before you look for a property, you should first take care of your finances. There’s no point spending so much time looking for a good property when you can’t really buy it and flip it. If you have limited finances, you also won’t be able to offer a good deal on a great property and of course won’t have finances to flip the house. So get this sorted out first before you do anything else.
2. Do the math
After you’ve set your sights on a few properties that you want to flip, you need to do the math. Know the after repair value (ARV) and estimate the costs of repairs and renovations properly. This vital part of the house flipping process will help you determine if a certain flip makes sense financially. It will let you know if the project will give you a good profit and help you decide whether or not you should do the flip.
So what information do you need when flipping houses? Get the selling price of similar properties around the area. Find out about the current state of the property, what repairs are needed and what enhancements are necessary. Then shop around to find out how much all of this work will cost you. Lastly, do the math.
3. Always stick to your numbers
After you’ve got the figures, ingrain this in your mind. A good rule of thumb when flipping houses is to never buy a property and flip a house that’s more than 70% of the ARV minus the repair estimate. Don’t buy a house and make repairs that are more than you can afford. Always remember your numbers as this is your baseline. You can go beyond this of course, but know that if you do there’s a risk of seeing little to zero profit on your real estate flipping project.
4. Consider getting help
When flipping houses, you may want to consider getting help when you need it. While there are a lot of investors that have managed to do everything on their own, it is, of course, easier if there’s someone who can help you with some things occasionally. Especially if there are some things you’re not particularly good at or simply don’t have the time for, you can hire someone for this. If you don’t have the funds to hire, you can offer them a split of the profits per deal.
Bear in mind though that if you do decide to bring someone into the equation, make sure you have a written agreement spelling out exactly what the other persons’ responsibilities are and what happens if that person doesn’t hold up their end. Partnerships have positives and negatives so go into them with Eyes Wide Open.
5. Don’t get greedy
So you’ve done all the hard work, spent a lot of time fixing up everything and now your property looks great. Maybe even better than you’d imagined. After seeing the finished product, you may be tempted to jack up the price. Don’t do this. Never overprice your property as you will risk it not selling. If this happens, you will have to hold on to the property for a longer time and this will mean carrying costs piling up. Always price the property appropriately when flipping houses.
With the right systems, flipping houses can be a walk in the park. But trust me, it’s not for everyone. You will need to invest a lot of time and effort into the project and make sure you get the financial part right so you can enjoy the fruits of your hard work. Following these tips above though is already one step towards becoming successful in your real estate flipping project.