How To Flip A House

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A Starting Guide For Beginners

House Flipping: How It Works

House flipping typically refers to buyers who purchase distressed properties, fix them up, and then resell them for a profit. They’ll typically find these properties via foreclosures, bank short sales, property auctions or door knocking. If you want to be successful in real estate flipping, then you need to be able to spend your money wisely and invest in undervalued properties. These are usually properties that require quite a bit of work. If you’re looking to purchase your first flip, Contact Us Today! 

Frequently Asked Questions

Flipping a house could require several hundred thousand dollars or almost no upfront money of your own at all. Everything from location, to condition, to your credit score can impact how much money is needed to flip a house. And no two flips are exactly alike, which means the cost changes from project to project.

1. Know Your Neighborhood
Before getting started, you need to spend some time researching the real estate market and choosing the right location to invest in. It’s a good idea to work with a real estate agent who can advise you throughout this home buying process.

Once you find a home you’re interested in purchasing, it’s a good idea to bring in a general contractor to assess the property. This will help you come up with an estimate of how much work needs to be done and whether the house still fits within your budget.

2. Use The 70% Rule To Plan Your Budget

The 70% rule is commonly cited among real estate investors as a top way to determine the ideal purchase price of investment property. This rule states that an investor should only pay 70% of the after-repair value (ARV) of a property minus the necessary repairs. The ARV is what the home is worth after it has been fully renovated.

For instance, let’s say the AVR of a home is $200,000 and it needs $25,000 in repairs. So, 70% of the AVR is $140,000, and when you subtract the repairs, that leaves a total of $115,000. Ideally, you won’t pay more than $115,000 for that home.

3. Assess Your Skill Set

Certain skill sets will make you more successful as a house flipper. For instance, knowledge of construction, real estate and design are good skills to have. It’s okay if you don’t have those skill sets yourself but that means you need to know how to find the professionals who do.

Before you begin flipping houses, you should assemble a team of experts who can assist you. This could be lenders, real estate agents, insurance agents, and contractors who help you find, fix and sell the property.

4. Finance Your Project

The next step is to figure out how you’ll finance your project. If you don’t have cash on hand to put toward the project, then you’ll want to get preapproved for a loan. To do this, you’ll need a good credit score and the bank may require a 20% down payment or some type of collateral.

5. Decide On And Buy Your House

Finding the right property is one of the most challenging aspects of flipping a house. That’s because you can’t just think about how much the house costs right now – you have to consider the potential resale value to ensure the highest profit margin.

Foreclosed, distressed and fixer-upper homes are all good options to consider. But you’ll want to use a real estate agent and contractor to help you understand the extent of the work that needs to be done.

Once you’ve found the right property, you can make an offer and close on the house. If the house is a really great deal, you can expect to have some competition from other potential buyers. Make sure you know what the maximum amount is you can pay for that house and still remain profitable.

6. Build Sweat Equity

If you’re new to house flipping and have a low budget, you can save yourself some money buying building sweat equity. This refers to the unpaid labor you’ll put into the project, either in terms of physical labor or mental effort.

Many entrepreneurs find that in the beginning, sweat equity is a necessary aspect of building a successful business. It’s what gives them the resources they need to keep the momentum to keep going.

7. Flip The House

Once the repairs have been completed, it’s time to resell the house. At this point, time is of the essence because the longer that home sits on the market, the less of a profit you’ll make. So, your goal should be to make improvements quickly and sell the house as fast as you can.

You’ll want to work with a real estate agent to help you list the house. Real estate agents can list the house in the Multiple Listing Service (MLS) database. They also understand market fluctuations and can help you determine the right resale price.

The 70% rule helps home flippers determine the maximum price they should pay for an investment property. Basically, they should spend no more than 70% of the home’s after-repair value minus the costs of renovating the property.

The 70% rule relies on a simple calculation: 

After-repair value (ARV) ✕ .70 − Estimated repair costs = Maximum buying price

That maximum buying price will give you an idea of how much you should spend on a home that you plan on renovating and reselling. Going above that price could jeopardize your profits.

You can become an investor with us today and receive exclusive off market properties that no one else has access to. You’ll be working alongside licensed real estate professionals who will get you the best discounted deals in California. Don’t pay closing costs or commissions ever again. Contact Us Today!

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