Starting a house flipping project is a lot of work. It is a risky job with tight profit margins if done improperly. If you are a regular home flipper, you probably think about a lot of things before making a bid on a fixer upper.
New “flippers” need to be aware of the industry they involve themselves in, what kind of property they are looking at, and what profit margins they will be able to achieve. While the things you think about may differ from house to house, there are general preparations you should consider before deciding.
You need to evaluate the cost of the project to ensure you can make a worthwhile profit. Ask the property owner if you can perform an inspection (or hire an inspector) to audit the damages. After you figure out what damages are done, you may need to pay even more money for specialty services to fix electricity, plumbing, and other utility problems.
Then you can calculate the cost of materials you need to make the house high-quality. Depending on your goal, you can try for cost-effective materials or you can shop around for the best of the best. Customize your budget based on your project ambitions.
Holding onto a house you are flipping for too long can make the project pointless from a money-making perspective. Generally, most house flippers can get the project done between five to eight months. This includes finding the home, placing an offer, and getting it sold.
Your goal should be to get the house on the market in the best condition possible. By making well-informed deadlines for each step in your house flipping timeline, you will avoid becoming discouraged or disenfranchised from completing the project, and will be assured that it will be a successful investment. Timing makes all the difference.
Plan for Mistakes
No project ever goes exactly how you plan, but it is the way you adapt to problems that will keep your house flipping endeavors afloat. There are several mistakes that most first time house flippers make.
First, you should avoid hiring cheap labor, and try to focus on good-quality work. Hiring cheaper specialists and workers to complete a renovation project can make you feel like you are getting a good deal. However, they might cost you more than they are worth in the long run. Spending more money on the best in your area can ensure you turn away from the job making a profit.
While building and demolition are important aspects of your flipping project, you also need to pay for waste management. You need to supply dumpsters, trash carriers, and pay fees to get rid of the debris you are throwing out—especially if you are running a full team of workers.
Besides clearing out the waste more effectively, there are other practical reasons you have ways to dispose of your waste properly. By keeping your property clear of debris, trash hoppers make the site safer. They can save you money by preventing environmental fines. They also just make it more efficient to dispose of your waste.
Specialists to Hire
When you get into the home flipping business, you need to make friends with specialists in other industries. Finding the best specialists to hire will help you in cases where a house has a severe problem. Check online reviews and compile a list of the specialists you think would be right for you.
Most house flippers speed dialing lists have an electrician, a plumber, an interior designer, a professional cleaning team, and sometimes lawn care services. Make friends with the people you hire. It will save you time in the future—especially if you plan to go full-time as a house-flipper.
Learn the Area
Another factor you should research early on is the area’s market. Different areas in your state or country may have higher rates of move-ins, employment rates, and market values. Before you buy a house, think about how easy it will be to sell it in a year’s time. If it does not seem worth it to you, avoid it like the plague.
If the area around you seems to be flooding with new families and has a healthy economy, it will be a prime candidate for the housing market. The quality of the market is just as important as the quality of the house.
This is a similar conversation as the talk about costs. You need to figure out what target price works for your budget, your employees, and your investors. Your profit margin should be reasonable to match the area market, while still being enough to satisfy the above parties. You should also attempt to pay as little as possible for the house you are about to buy.
This is an aside, but if you are having a hard time selling the property, you might be able to rent the property out for a time. Check the market to see if it becomes worth a sale.
Doing the Work
You need to think about who is doing the manual labor you want to get done. Having a solid team behind you is crucial to get the work progressing. Family members might want to help, and in turn, may want to invest in the project.
Working with family might not be for you, which means you should hire other contractors. Hiring quality labor is also important. Check online to see which contractors need jobs. If you are primarily going to work on it, you may be able to hire workers for specific jobs.
Your house flipping process will be a huge success so long as you plan before you pay. The factors in the housing business are more diverse than other markets, and should be analyzed with great certainty. So long as you have a plan for time, money, and labor, you will be able to recover from any shortcomings. The first house flip is usually the toughest, but once you get into these habits, it will be easier for you to make a profit. You and your team can do it!
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