“Flipping” a house typically means buying, rehabbing and selling in less than six months. Have you thought about trying your hand at flipping? Many enjoy the hunt for properties and the challenge of rehabbing for a profit. You can start rehabbing and flipping one home at a time. Here are seven tips to help you get started:
- Determine how much money you have to work with and buy the home with cash to avoid adding mortgage interest to your costs. This may be your own money or an amount that includes money from investors.
- Have a relationship with several good contractors who know how to accurately bid rehab projects like updating a kitchen with new cabinets and granite countertops or adding a new bathroom vanity. You’ll need to know these costs when determining how much to offer for a property you want to flip.
- Find your niche. Choose a home size and neighborhood on which to focus. Become an expert in your niche and you’ll save yourself a lot of time and money. Look for properties in neighborhoods where prices are going up or that have a lot of older homes that need rehab.
- Work with a Realtor who can provide a comparative market analysis. How much are homes in your niche selling for? What features do they commonly have? What is their average time on market? This will help you choose properties to buy and know what rehabbing you will have to do to sell for a competitive price.
- Don’t invest more than 70% of after repair value (ARV) in the purchase price and rehab costs of a home you plan to flip. Why? Because you’ll still have other costs to consider. You’ll have to pay for utilities, property taxes, homeowners and liability insurance while you’re rehabbing the home. When you sell, you’ll need to pay Realtor’s commission and closing. Keeping your investment at 70% ARV is the traditional formula for covering your costs and making a profit.
- Know your buyers. Do you think your buyers be families, singles or couples who are downsizing? Know what features are important to them and rehab with your buyer in mind.
- Price competitively. You may be tempted to ask a higher price than you originally planned after seeing how great your rehab work turned out, but that’s taking a gamble. Keep the comparative market analysis in mind.