With low interest rates and an influx of young families looking to buy starter homes, the practice of so-called “house flipping” is on the rise. That’s when people buy homes at low rates, spend the money to fix them up, and then re-sell them at a higher price, usually all within a span of six to 12 months. Sure, it sounds like a fun way to make money, but it’s not as easy as it may sound. If you’re thinking about getting into house-flipping, here’s what you should know before you start.
- Financing is everything.
Anyone who’s ever bought a house knows the many hoops you have to jump through to get proper real estate secured lending. Now imagine going through that process several times a year in order to earn your salary. What’s important to remember is that there are investment mortgage lenders who specialize in secured short term loans for house-flippers in particular. Familiarize yourself with these companies, learn as much as you can about commercial real estate investing basics, and be prepared to work with secured short term loans on a frequent and intimate basis. - It’s about your local market.
You may hear an amazing story about someone across the country who took up house-flipping and made a fortune. You may love watching the reality TV shows. But the fact is, it doesn’t necessarily matter what’s happening elsewhere. What matters is what’s going on in your immediate market. Urban population growth started outpacing the suburbs for the first time in 100 years beginning in 2011. If you’re in a hot market, you’ll have higher upfront costs. But buy now in a cool market that’s ready to warm up and you could turn a pretty profit. - Keep track of the details.
Every single detail you put into a home should be recorded, whether it’s fresh paint, a new roof, fresh bathroom tile, etc. Remember that every effort you put in is part of what increases the value of the home when you go to re-sell. In this line of business, it pays to be meticulous, down to the very last penny.
House-flipping is a fun and exciting world, but it’s not for everybody. Learn the ropes before you jump in to make sure that your house flip doesn’t come out as a house flop.
