Flipping homes is a great way to make money. You buy a rundown home, fix it, and sell it for much more than you bought it. Some say it’s complicated, but with the right steps, anyone can do it. Keep reading to learn how it’s done.
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Figure Out Your Plan
First, figure out your financial plan. How much money do you have? Are you paying cash or financing the property? This makes a difference. If you have a large down payment, you’ll have more opportunities for larger loans. If you have little cash, though, banks may be a little tighter with their loan amounts.
If you need financing, get pre-approved. There’s no sense in shopping in a market you can’t afford. Many lenders today offer investment home financing, but you must qualify for it. Do this step ahead of time to know where you stand.
Next, think about how much money you have for renovations. Do you want to buy completely rundown homes or those that need just a little work? There’s a big difference. Completely rundown homes, for example, require more money to repair. You’ll also have possession of the home longer. How fast do you want to ‘flip’ the home and see a return on your investment? This helps determine what type of home you buy.
Before you look for a home, assemble your team. Flipping homes means that you must rely on the expertise of professional contractors from all trades. Get referrals and do your research. Figure out who you like and get basic quotes from them. This will help you with the step above too. You need to know how much money you need for renovations. Finding out after you own the home that you can’t afford the renovations won’t’ help.
Get a Realtor
Once you have all of your ducks in a row, hire a realtor. Sure, you can find homes on your own, but you won’t have access to as many homes as you want. Realtors have their nose to the ground – they know when a home hits the market that’s a good deal. What if you could jump on that deal before anyone else knew about it?
Work with a realtor that specializes in selling investment homes. This realtor will be on his ‘A’ game when it comes to finding homes. You want the homes that no one else wants because of the home’s condition. Of course, if you are financing the home, you’ll need it to pass the appraisal. A reputable realtor will know what you need and help you find it.
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Sign the Contract
Once you find a home, sign the contract. If you need financing, get your lender going with the property details. Hire an inspector, get the appraiser out there, and provide the lender with any conditions they need.
While you wait for the financing to go through, get the renovation contractors in order. Sign any contracts you need for the contractors and secure all specialists based on what the inspector found wrong with the home. Use this time to negotiate costs to help keep your profit margins as high as possible.
Get your contractors scheduled to start work as soon as you close on the property. The quicker you renovate the home, the quicker you can flip it.
Get the Work Done
Once you close, the race begins. Do the work you can do and stay on top of the contractors doing the other work. Stay organized to get the work done as quickly as possible. Every day that you keep possession of the home is another day that it costs you money.
Watch the contractor’s work closely, make sure they stick to their promises and follow through on all work. Inspect all work as much as possible and don’t pay any contractors up front. Pay them in increments as they complete certain phases of the project.
Sell the Home
Once the home is complete, it’s time to sell it. This is the fun part – showing off your masterpiece. If you have a realtor – list the home with him or her. You may sell the home faster and for more money than you could on your own.
Make sure you know the after repaired value of the home. If you don’t, hire an appraiser to give it to you. This should help in your pricing. Also keep in mind how much you paid for the home. You want to make a profit, obviously but don’t want to overprice the home or no one will buy it.
That’s it! With these simple steps, you can flip a house and make a profit. Of course, you must do so in ideal market conditions. Not all house flipping will be easy. A lot of them will include blood, sweat, tears, and lost money. Learn from every experience and you’ll get stronger with every home that you flip.