Real estate investing is becoming increasingly achievable for many individuals.
These days, there are several ways to invest in real estate besides building a brand new property and selling it for a profit; one of them is flipping houses.
House flipping (also referred to as a fix and flip project) is the business of buying a property, usually abandoned or foreclosed, renovating it, and selling it to a prospective buyer.
On the surface, it looks effortless, glamorous, and lucrative, thanks to the handful of reality TV shows featuring how to flip houses.
Is it effortless, glamorous, and lucrative to flip houses?
Experts agree that it’s profitable to flip houses when done right. But it’s not without risks and sweat.
How to Flip Houses for Beginners
One of the common mistakes that novice house flippers make is being impulsive in getting into the house flipping business. If this is your first time investing in the real estate market, you can avoid losing money with the following tips:
1. Do your homework.
House flipping is just like any other business; it requires money, time, planning, patience, and reading.
You may have enough cash to invest, but it still won’t guarantee a successful house flipping project. Without a plan, your investment can go down the drain.
Without patience, you could sell the property at the wrong price. You may spend more on unnecessary repairs and other costs without doing research.
2. Be creative in finding a property.
The internet is an excellent place to start, but don’t just rely on multiple listing service websites.
Look for property wholesalers – they are in the business of finding and buying properties below market price.
Joining the wholesalers’ mailing list can give you access to hot deals in good locations. Alternatively, check local banks for foreclosed properties or connect with realtors.
3. Check several properties.
Resist the temptation to make an offer to the first house you see just because it has a vast lawn or the house layout is perfect to your liking.
Remember that you’re not buying a home for yourself but looking to make money in the real estate market. Take your time checking out a few houses and decide when you’ve seen enough.
4. Don’t get swayed by a low price.
It’s tempting to buy the cheapest property to flip and think you’d be able to sell high. Experienced house flippers can tell you that buying low doesn’t always guarantee a healthy profit or ROI.
The location and condition of the property can determine whether you will save money and sell back the property fast or you will spend more and wait longer to earn a potential profit.
5. Be realistic with your time.
A house flipping project involves finding a property, repairing, marketing the finished product, looking for potential buyers, etc. A DIY house flipping project can save money.
But if you have a day job, it could delay completion time. The longer it takes to flip and sell the house, the more expenses you may incur and tax to pay.
Experienced house flippers outsource the work that others can do better to focus on more important aspects of a house flipping project.
How to Flip Houses in Australia
House flipping can offer a sizeable profit, making it an attractive opportunity for individuals looking to diversify their investment portfolios. However, there’s more to it than simply knowing the best area to flip houses and when to make an offer.
Can you flip houses in the current Australian market? The short answer is yes. However, not everyone who enters the house flipping business is a success story.
There’s a lot to know about how to flip houses for a living, and one of its painful realities is that house flipping is not a quick get-rich scheme.
To get maximum profit flipping houses:
1. Prioritise structure when buying a property.
Old or broken windows, dilapidated doors, outdated wallpapers, ugly paint, and an unkempt yard are easy to fix. A seasoned interior designer can improve the house’s aesthetic appeal with minimal expenses.
However, termite and mold infestation, roofing issues, leaky pipes, and foundation damage are more expensive to fix. As there are other expenses involved in house flipping, your goal is to find a property that doesn’t need extensive repairs.
2. Offer a sizable deposit.
Paying the total deposit with cash is always better than avoiding private mortgage insurance (PMI).
Otherwise, you have to borrow money, and most banks require a 20% deposit of the property’s purchase price. Your other option is to look for hard money lenders that offer borrowers competitive rates.
3. Identify your target buyer.
Before you hire people to fix and flip the house, know who you will sell to. What does your potential buyer need?
What would the buyer pay for? Determining your buyer’s persona can help you save money and slash your renovation budget by focusing on necessary repairs and refurbishing.
4. Focus on what’s important.
Over improvement means more money to spend. To recoup all repair costs and get a healthy profit, you may be forced to sell high and not be able to sell the property quickly.
Unless you’re flipping the house for your use, pay attention to essential improvements like bathroom fixtures, flooring, paint, and light that can increase the property’s market value.