When people watch real estate reality television, house flipping looks like a fun and easy way to make money. While house flipping can be profitable, it is not entirely foolproof. Before a person starts flipping houses, there are a few things they need to know.
Never Pay Too Much
One of the big mistakes flippers make is overextending their budget. The exact amount a flipper should pay for a home varies a little depending on the market. A good rule of thumb is to consider the value of the property after repairs. Calculate what 70 percent of the value is, and then subtract the estimated cost of repairs. This will give buyers the amount they should pay if they want to ensure the profit will be worth their time and energy.
Pay Attention to the Location
The best flippers are ones who have an in-depth understanding of their local real estate market. This is important because it helps people identify promising homes. Flippers need to do their research, so they can find properties that will actually sell after flipping. Otherwise, they might end up putting too much effort into a house located in a spot where it will never sell for a high amount.
Learn Which Repairs Are Pricey
A lot of house flipping success relies on finding the right home to flip. This is important because certain repairs are far more expensive and time consuming than others. In general, cosmetic repairs are easy, while structural repairs are hard. Flippers may want to focus on homes that just need a coat of fresh paint, some new kitchen cabinets, and a refinished floor. These types of repairs are fairly budget friendly but have a huge impact. Meanwhile, repairs like shoring up a cracked foundation, replacing a roof, or fixing termite damaged walls can be expensive without providing a large return on investment.
Know What Buyers Want
To make the most profit, house flippers need to design a home that appeals to the typical buyer. They may need to research things like popular wall paint colors, trendy lighting fixtures, and desirable flooring materials. Instead of relying on their own tastes, they need to be prepared to design a home that will appeal to potential buyers.