You have seen house flipping on television. The whole idea inspires you. You know that with a little elbow grease, sweat equity and a great low-budget piece of real estate you can make several thousand dollars in just a few months. That is, you can if you know what you are doing.
The superstar house flippers on TV make it look so easy. Surely, you can figure out your way around a good foreclosure deal in your area, borrow some money and get the job done. Within three or four months you can pocket your cash and buy your next property. While this is possible, you need to be aware of the risks of flipping.
You could put all your own cash into it and go bust. Much of the success flippers have comes from having a good idea of what makes a house a worthwhile project. They also have an idea of how much they can afford to lose in a worst-case scenario.
If you are sure you want to get your toes wet in the house flipping pool you first want to figure out how you are going to finance the deal. Do you have liquid cash? Do you want to borrow money from your 401k? Maybe you are pairing up with some experienced investors near you and plan on borrowing from them.
Lenders are no longer making the kinds of products that led to the Great Recession. If you need to borrow money, be sure your credit is in great shape. If you are getting a property from an auction, you might be able to take out a home equity line of credit or HELOC against your own property.
Always consult with a local real estate agent or a local house flipper who knows the area and market. Every real estate market is entirely different so you want to make sure you understand what you’re getting in to. For my last flip, I consulted with a local Indianapolis home buyer, and they were able to guide me along telling me where and what to look for and what to stay away from.
Know the real estate market of the location where you are investing. Hopefully, you will be buying something near where you live. You will need to be at the property frequently to oversee the project, after all. Do not buy a property online sight unseen. This is something expert flippers might be able to do but not a beginner.
Ideally, the property should be in good structural shape with the basic systems intact. Have an inspection done to make sure of this. Also, try to buy property that is near a good school system. These properties tend to sell faster than others.
You will have to pay the mortgage, insurance, utilities, the property taxes and closing costs. Allow for a few delays or extra repairs or you could drain your resources too soon.
When you get ready to hire help for your rehab, make sure you compare rates carefully beforehand. You might want to ask a real estate agent or another investor for tips on what the going rates are. Otherwise, you could wind up spending way too much for inferior work.
Approach a flip with care and get armed with information. If you do, you are more likely to enjoy succeeding at that first one and move on to your next in no time at all.