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How to flip a house: all about house flipping investors

Before I talk about how to flip a house let me tell you something.

Do you want to invest in the real estate market?

Maybe this is the ideal option for you.

After all, who doesn’t want an investment that has a return of, on average, 40%. It is more than the majority of the stocks of the financial market, isn’t it?

Well. But what is house flipping?

Basically it is a matter of buying a house, to reform it and sell it at a price much superior to the acquired one.

In fact, this is the short answer. House flipping is much more than that.

But stay here until the end. I will explain you all about it. 

I’m warning you, it’s not as easy as it seems. On the contrary, it’s a business that has its risks and that’s why we have to do it right.

The first step to know how to flip a house

how to flip a house

Despite being a highly scalable business within the financial market, house flipping has some requirements.

First of them: you need to have money. Or did you think you wouldn’t buy the house before selling it?

So, to be a flipping investor no doubt you need to have money not only to buy the house, but also to give it another look.

After doing all this in a very strategic way, your property will be worth much more than you invested in it.

So, don’t be deluded only by the benefits, but be aware of the risks you will have.

What are the basic skills to flip a house?

Surely house flippers are professionals with an exceptional vision within the real estate market.

I say this because without seeing the prospects of buying a property, there is no house flipping.

In other words, who wants to follow this career needs to have a very strong something related to real estate ventures.

You can’t buy a house just because it is cheap. In fact, that’s the least of it.

The successful house flipper is the one that sees the repressed potential of a property.

Moreover, it is clear that this professional must have good knowledge about design, about electricity, construction, that is, everything that involves renovation.

It is necessary not only to have a clinical eye in relation to designing a pleasant and beautiful environment, but also to have a good notion about the costs involved in the reform.

Finally, do not forget to define the budget for the reform itself. For this you will need to master the trends of the neighborhoods where you want to do flipping, that is, know how and why the houses sell fast in that place.

Setting up the land to buy the ideal flipping property

Once you have understood the prerequisites to flip a house we can now enter into a more technical part.

What should be done before buying the house?

Come with me!

Become a real estate agent or hire one

As I said in the article about realtors it is of utmost importance that everyone who wants to buy or sell a property has an agent to help you in the process.

After all, besides having all the expertise on the real estate market, the realtors have access to exclusive lists of opportunities that are not accessible to those without a license.

So I strongly recommend that if you don’t want to hire a realtor, take your own license. 

Ok, this will take time and money from you, but think that every day you invest to take your license you are getting to know more about the real estate market, which is something basic for flippers and you are saving the brokerage fee of 5 to 6%.

Have a contractor of your confidence

I know that you who are starting don’t have much money to invest. But rest assured this investment will be worth every penny.

Because in fact a good contractor will take care of all the retirement for you and, therefore, you won’t have to worry about labor, material or problems that usually arise in every retirement.

So, unless you are already a licensed contractor, I highly recommend you to look for a reliable one before buying to do flipping.

Also, a professional who does a good renovation on the property will help you to make even more profit when you go to sell, since the house will be more valued.

Thus, you will pay the commission of 10 to 20% of the value of the retirement for the contractor smiling.

Don’t squeeze into the quote

I’ll give you a friend tip: before you know how to flip a house, know exactly how much you have in cash to pay.

If you don’t have a penny and have to make a loan, make sure that the flipping will be profitable to the point that you can pay the monthly installments to the lender.

In this sense, avoid mortgaging the house you will use for the flip as much as possible, as this makes the business very risky.

So, have clear the expenses you will have with the whole process: fees, brokerage, contractor, expenses with unforeseen events. 

After all, it may be that when breaking a wall you realize that the house is infested with termites. Then you will have to disburse an extra amount to exterminate this problem.

It’s time to show how to flip a house

Well, now that you know basically everything that needs to be done before you buy the house, you need to look for the ideal opportunity.

To do this you will have to know which are the market trends and, mainly, which are the well accepted selling values.

So, having an average in relation to fair sale values, and how much will cost the remodel is just to roll up your sleeves and look for the ideal house. 

If you are a realtor, you can have access (for 200 to 500 dollars) to Multiple Listing Service (MLS) through which you will have access to the properties for sale in that region.

Also, when you find the right business, make sure you have all the permits for the construction.

Finally, now get to work. The time to do all the renovations will take from the size of the project and how many employees the general contractor has directed to work.

Once the house is ready to sell just put it on the market in order to wait for an interested buyer to make a proposal. Don’t forget to evaluate well before what the average value is for the properties in that region. 

This way, you won’t have difficulties making sales.

How to ensure a profitable flippling

The best way to avoid loss is to use the 70% rule. What do you mean?

Well, it’s basically a mathematical account. You should not pay more than 70%.

After all, analyzing the price you can pay for a property until it is relaunched at a profit is fundamental in any negotiation. 

This rule guides the house flipper not to pay for a house more than 70% of the difference between the value after renovation and the cost of necessary repairs”.

See this example: 

“If the value after renovation is $200,000 and the home requires $30,000 for renovations, the 70% rule dictates not to pay more than $110,000 for this property. See: $200,000 (after renovation) x 0.70 = $140,000 – $30,000 (repairs) = $110,000”.

After finding the house at the right price, it’s time to make the renovation money.

The renovations that give the most return on investment (ROI) are:

  • Kitchen
  • Closet
  • Roof
  • Floor
  • Painting

In other words, taking a carpet to add a hard floor can be very profitable.

Besides, maybe the cheapest way to get a good ROI is through a new painting.

This way you will guarantee the success (profit) of your flipping.

Conclusion

Surely learning how to flip a house can be a very profitable business within the real estate market.

After all, it’s not every day that you get an average ROI of 40%. 

But, as we have seen, it is not an easy career. It is necessary to have the right skills and to do a good planning before entering this endeavor.

In this sense, it is essential to hire a realtor and a general contractor (if you are not one of them) to support you during the process.

This is without counting the initial investment that requires a larger budget than other investment options within the real estate market, such as wholeseling

Anyway, after all that has been said here what remains for me to say is that house flipping investors are true artists, since they know how to literally turn garbage into resplendent and attractive housing for entire families.

That said, house flipping investors are one of the most important stakeholders within the real estate market, since they are experts in making houses full of problems, real consumer dreams.

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