So you’re finally ready to learn How to Flip Houses
Congratulations! You are about to learn how to make good profit while helping the community improve overall home values. If you still are undecided about moving forward with house flipping, check out our basic house flipping guide here. There is a lot to learn, so let’s get started. You know you want to flip houses, but where to start? Well, first you need to ask yourself the following questions: Where should I buy? How much money will I need? Can I get financing? Should I sell the flip, or rent it? We have answers to all these questions, so keep reading. You’re journey in learning how to flip houses is about to get started. Nobody said learning how to flip houses would be easy, but we are here to walk you through it at WestSideMarket.com.
Where should I buy?
Well, that depends on your budget. Depending on your income, and your savings that will vary. Also, risk/reward is very important. Are you looking to sell your flipped home or rent it out once renovations are complete?
I want to rent my flip once finished
So you are looking for a consistent income stream. Great! If you want to rent your flip, you should begin looking for areas that were recently devastated financially, but are not completely vacant. There will also be people trying to learn how to flip houses in your selected neighborhood, so be ready for competition.
The reason you want an area where homes are cheap, and finances are tight is because the rental demand will be high. There are a lot of potential homes for flipping like this in the Midwest. After manufacturing jobs started leaving the country, the midwest was devastated financially. This means a lot of people lost their homes, and as a result, there are some good deal to be had. Also, the average person in these area’s has a less than perfect credit history, which means they are forced to rent.
You’re probably wondering why you shouldn’t buy a rental property to flip in an affluent area. It’s simple, your financial reward will be less. Let me break it down for you, a home where you can spend a total of $20,000 and rent for $800 per month, or a home where you can spend a total of $300,000 for and rent for $2,500. Yep, that’s right, the $20,000 investment has a better financial reward.
I want to sell my flip once finished
Okay so you are looking for the fast cash route of house flipping. If you are looking to flip a house and sell it on the market for a quick profit, you should look in markets that are hot. The last thing you want is to invest in a house, complete the renovations, and then have the home sit on the market for 6 months to a year. If your goal is to sell, you want to get in and out as quickly as possible. Also keep in mind that the longer you are forced to hold a house, the higher chance you have of prices in the area dropping, cutting into or eliminating your profit.
If you’re trying to flip and sell, the allure of buying a cheap house for a total investment of $20,000 seems attractive, but keep in mind, what are the home prices looking like? Is it financially rewarding to spend $20,000 on a flip to possibly sell it for $30,000? There is not a wiggle room here, what if something comes up and your budget goes over by $10,000? You will have completed all the work for free! All risk and no reward.
How much money will I need to flip a house?
How much money you need to flip a house depends on your strategy. If you have enough money to invest, you may be best suited to buy and rehab the house using only cash. The reason for this? Banks are hesitant to give loans for rehab projects and you may have trouble. At the very least, you should have at least 20% of the total home purchase and rehab cost to qualify for a loan.
Is financing available for flippers?
Although bank financing is usually tricky to obtain for house flippers, there are other options available. There are many hard money lenders that specialize in these types of loans. Keep in mind, when using a hard money lender, you can expect interest rates to be higher than a traditional bank loan. This means that if you plan on buying the house and selling it, you want to complete the project as soon as possible so you can save on interest costs.
Selecting a Real Estate Professional
While you may be able to close the deal on your own, selecting a real estate agent would be in your best long term interest. Keep in mind, look for a real estate agent who works with a lot of investors. You do not want a typical real estate agent. Why? They usually deal with homes that are move-in-ready. You want an agent who already knows how to flip houses.
Don’t be scared to ask the agent questions. Ask if he or she has any time when you can stop by their office to talk. When you get to the office, be ready to ask the agent questions such as, how is the market in the area? What is the average sell price? How quickly can this agent close deals? And most importantly, does this agent work with investors and house flippers? If not, be nice and ask for a referral to an agent that works with investors. It is crucial to work with an agent who regularly works with house flippers and knows how to flip houses. This will also help you when it comes to sell, because you would want to work with the same agent.
Remember, before making a decision on the realtor, ask for references from other house flippers so you can be sure the agent really knows how to flip houses!
Find a good contractor(s)
You want to decide on contractors before you even put an offer in on the house. Before buying a house to flip, you need to know how much it is going to cost to do the rehabs.
There are a few options when it comes to contractors. You can either contract the entire project out to one contractor who will slice it off to subcontractors, or you can take a more active role in the process and hire the contractors for each job yourself. For your first flip, I’d recommend hiring one main contractor who knows how to flip houses, and have him or her manage the entire project. However, make sure the contractor is aware of your expectations and is budget conscious. Also remember your chosen contractor(s) should know how to flip houses! Ask for references from other flippers so you know for sure the contractor does indeed know how to flip houses.