Flipping a house can be extremely profitable, or it can be disastrous. To buy a house, make improvements and sell it at a profit, you must choose the right property and make the right renovations. Its easy to make costly mistakes, so getting professional advice is crucial.
Choose the Right House
You dont want to find a house that you think you can flip and earn a profit on, then wind up overwhelmed by the costs. Have a house inspected before you buy so youll know how much work it needs. A real estate agent with a thorough understanding of the local market can help you get a good deal on a house to renovate and resell.
Make the Right Upgrades
If a house needs major repairs to make it safe or inhabitable, such as a new roof or plumbing or electrical work, youll have to make those improvements, and they can be expensive. That means you might not have much room left in your budget for other projects.
Flippers often spend so much money on improvements that they earn little or no profit. Redoing the kitchen and bathrooms can cost a lot but may not add nearly as much to the sale price. Less expensive improvements can lead to a higher profit margin. Also, fixing up a house too much can make it worth significantly more than the rest in the neighborhood, and you may wind up struggling to sell it.
Be Realistic About Costs
Figure out your budget in advance. Be realistic, and keep in mind that renovation projects often go over budget or get delayed and that workers frequently find additional problems after work begins. Also consider the cost of utilities while youre working on the house, as well as real estate taxes.
If you pay contractors, thatll reduce your potential profit. Youll also have to spend time communicating with them and supervising the work.
If you have construction experience, you may be able to make some or all of the repairs yourself. That can keep costs down and maximize your profit, but it may extend the amount of time required to flip the house if youre also working full time.
Avoid Taking on Debt
Borrowing money to finance improvements can make things even riskier. Youll have to pay interest on a loan, which can eat into your profit margin. If youre struggling to make loan payments, you may be forced to sell the house for a low price and barely break even. If you pay with cash, you may be able to wait longer for housing prices to rise and make more of a profit.
Do Your Research and Get Expert Guidance
Flipping houses can be lucrative, provided you make a series of smart decisions. Ask a real estate agent for help choosing a house to flip, get it inspected, set a budget, and be realistic about the amount of time and money required and your potential profits.
Published with permission from RISMedia.