Handy home repair people who keep their own houses in good shape might be surprised by the amount of math, muscle, and marketing involved in flipping houses. If you have assessed your own skill set and decided to give real estate investing a try, here are some pointers about how to get started flipping houses.
House-flipping succeeds through the efforts of a combination of people. Real estate agents, accountants, lawyers, and licensed general contractors are all part of the mix. Join a local real estate investing group and learn from experienced and successful entrepreneurs. Connect with experienced agents who can provide perspective on the housing market. Test your ideas about the types of properties, the locations you are considering, and the features that homebuyers actually want by talking to investors who have been there. Think about the best legal structure for your investment business and get professional advice about things like taxes, zoning, and permits.
Unless you have a stash of cash or a cadre of well-off companions, you’re going to need financing. “Fix and flip” loans are typically higher interest and shorter term. You’re supposed to fix the house, turn it over to a buyer, pay the loan back, and, if everything goes as planned, exit with a profit relatively quickly. Getting financing, even from friends and business acquaintances, requires that you show you have a plan. Start with an online template to help you spell out the scope of the projects you are considering, the locations and types of properties you are targeting, and why you think you can turn them over successfully.
Once you have located a likely property to buy, run the numbers. Calculate how much you think it will cost to fix up the home and make it move-in ready. One of the biggest mistakes house flippers make is underestimating repair costs or failing to save for contingencies.
No matter how fast you move, market conditions could move faster, making the move-in-ready home hard to sell. Understand the “BRRRR” process: buy, rehab, rent, refinance, repeat. If market conditions shift significantly, you may have to find a tenant to rent the home in lieu of a buyer to purchase it. However, the BRRRR method is simply a different way of making money in real estate, where an investor generates income through rent and builds wealth by holding, instead of selling, a portfolio of properties.
Ultimately, both BRRRR and flipping involve buying and rehabbing houses. Getting started flipping houses requires building a network of professionals to help with the financial, marketing, and legal aspects of a new real estate investment business. Then, begin with a home that needs only some cosmetic changes to make it attractive to a buyer, before moving on to projects that are more substantial.