House flipping (buying a home at a low price and then selling high after repair) has been popularized by a variety of television shows and a hot real estate market. It also has been a prime era, as many homes in the housing stock turn a hundred to fifty years old. Coupled with the ageing boomer population looking to downsize, many major metropolitan areas globally have been hit by the house flipping frenzy.
If you are considering jumping in to the pond with the other fish, here are some basic rules that will keep you out of the deep end.
1. Look for homes in foreclosure or pre-foreclosure. This is definitely the cheapest way to purchase a quality home. Pre-foreclosure, or contacted the owners before the bank repossesses the home, is also an altruistic way of helping some in need out.
2. Don’t by houses needing the majors. Stay away from faulty wiring, oil furnances, leaking roofs, and bad plumbing. These things can add up quickly, and are not a wise short term investment.
3. Be prepared to invest some sweaty equity. The cheapest (and often best) way to prepare a house for a flip is to hand deliver some elbow grease. Whether landscaping, painting or even a simple deep clean, you need to have free time on your hands to give your investment some TLC. It also takes time to list the home (either by yourself or with a real estate agents) so this is not an ideal opportunity for busy folks.
4. Once all your ducks are in a row, the easiest way to flip your home is to make a checklist. Think of the assets and liabilities of the investment. Is a solid home, but with a tiny yard? Maybe a possible upper level deck increases outdoor space.
Is the kitchen small? Think of ways to expand the space by reconfiguring cabinetry. Bought a home that has nicotine stains? There are commercial products available that can serve as a primer and a deodorizer. Use a little ingenuity to make the liabilities support the assets.
5. Think about duplexes. With the real estate market cool off, there is still a lot of interest in affordable starter homes. In that case, you may consider splitting your larger home off in to two townhomes. This is a good way, in the end, to sell at a lower price point but still make more money!
6. Once you have invested in the cosmetic and minor repair necessary to bring your home up to date, investigate new avenues for marketing.
7. Hopefully, you have a kitty of money stashed to help you weather the rollercoast real estate market. This helps you avoid a pump (money) and dump (at a loss).
Overall, the most important aspect of house flipping is reliant on two things a) knowing your market and b) being organized and prepared.