Flipping properties might look like an easy thing if you were to look at the TV commercials and listen to the happy stories that real estate agents tell about it. But is it effortless as it looks? This article will highlight the fundamentals of flipping properties, after which we hope you will decide if it is as simple as it seems.
At the most basic, flipping properties involves the purchase of property by a real estate investor who then resells it at a profit. At times, this may involve developing the property a bit further and adding a few tweaks to it. Whatever the case, all this is done with the motive of making a profit. Some real estate investors may do this individually while some may formally do it as a business or corporate entity. As with the case with ordinary businesses, flipping properties also has its fair share of risks. Losses can be made, and there are periods of booms and recessions.
With the above description, flipping properties may seem like something that anyone can wake up and do. However, this is not the case. Flipping properties requires a number of skills before venturing into the business. There are also some requirements that one needs to satisfy to be successful in flipping properties.
Requirements for Flipping Properties
Cash is an essential in flipping properties. You’ll need it to make down payment for properties. You may use your savings or may get a loan to finance your business venture.
2. A good credit score
No business can run without financial liabilities such as loans. In real estate, you may actually need lots of loans, so having a good credit score is a plus for you. Many banks and lenders have tight requirements, especially for home loans. Therefore, having a good credit score may be a good leverage for securing home loans.
3. In-depth knowledge of the real estate market
An intimate knowledge of the property market is required for you to be a successful flipper. You need to know the best location to purchase property, regulatory, legal and statutory requirements, the current prices of property and also expenses that have to be incurred. Some of the costs include property taxes, insurance, mortgage payments, etc.
4. How to Be Successful in Flipping Properties
Have Some Experts around You
You can certainly flip properties alone.However, it makes practical sense to have certain individuals around you. They include:
- Construction experts and contractors
- Home inspectors
- Insurance agents
- Real estate agents
Their services will come in handy in your venture as a house flipper. Make sure that they are reliable and trustworthy.
Be a Good Estimator
Property flippers typically purchase property and later resell them at a profit. This may at times involve structural and cosmetic ramifications on the property which may have costs. These costs have to be estimated well to avoid making huge losses. Therefore, property flippers ought to be conversant with the costs of such ramifications to arrive at a good cost estimate. They include:
- Cost of construction materials
- Cost of labor
- Timelines for construction
- Local construction codes
Basic Handyman Skills
Sometimes it pays to be handy in stuff that involves home improvement. This means that you should at least know how to do some electrical work or painting, plastering or even plumbing works. You should be conversant with how to install a countertop or fix a ceiling or even install a fan.
The premise here is to know some basic home improvement stuff. At times, financial constraints may plague you such that you may not afford to hire someone to do these things. Again, if you know how to do them, you won’t need to pay someone to do it. Also, there are times that some work may be required to be done on the property on short notice. For example, a buyer may be coming to view the house in a day’s time but you blocked the sink, or the ceiling was leaking. In such instances, your handy skills will save you.
You really have to know how to negotiate. This will help a lot in haggling with contractors, homeowners and other parties involved in a flip. It enables you to get properties at lower prices and lower input costs for ramifications. This translates to more profit in the end.
In conclusion, flipping properties is multi-faceted and is broad. There is a lot that takes place than just buying a house and reselling it at a higher price. There is indeed a lot to talk about in flipping properties. Even so, the above consideration will give you a basic understanding of flipping properties.