With that in mind, here are ten tips for successfully flipping houses in today’s market.
There are a variety of ways nowadays that you can make your money go further through investment.
Whether you’re familiar with investment property right now or not, there’s never a right or wrong time to start.
However, none are as financially beneficial as investing in property can be.
If you’ve got a talent for DIY or you’re good at finding property at a steal, then flipping houses might be a great use of your money in today’s market.
1. Budget
Budgeting is the first consideration to make before you commit to any property. Whether you’re paying out for the property from savings in full, or you’re looking to borrow from the bank in order to pay for the property in advance.
The budget you have will look different from other investors’, so you’ll want to know what yours is in order to be realistic with what you can get. There will be plenty of properties within your budget, but there’s no point in seeing properties that are outside of what you can afford.
Consider what you can comfortably afford and be sure not to overstretch yourself when it comes to the investment itself. You also want to calculate the costs beyond just the purchase of the property. You’ll want to consider legal costs and the money you’ll need to do the work on the property you’re flipping. That includes furniture, too, in most cases!
If anything, this is the most important part of the process, so be careful about how much you can afford.
2. Do your market research
Do you know a lot about the property market as it stands? Have you invested in property before, or is this your first time? It’s good to do your due diligence by conducting market research. This is a crucial part of the process because you’ll want to know what looks like a steal of a property and what might cause you a few headaches along the way.
There’s a lot to learn about the real estate market, like whether it is a buyer’s market right now or a seller’s one. Ideally, you want it to be in your favour as this will ensure you get the best deals possible.
Look at the areas you’re looking to invest in and explore your options when it comes to the types of property you’re looking to flip. For example, a studio flat is going to be a lot easier in most cases to flip versus a five-bedroom house that could take months and months to renovate.
The more market research you can do, the more informed you’ll be, which helps greatly for the purpose of your investment. Everything you need to know about buying property can be found through thorough market research.
3. Follow the 70% rule
When it comes to property flipping, many experienced flippers of real estate recommend the 70% rule. This rule suggests that you should never pay more than 70% of the property’s ARV – After Repair Value. This is then minus the cost of repairs. With this rule in place, it helps ensure that you have a margin for unexpected expenses, market fluctuations, and profit.
Firstly, estimate the ARV. This will be how much your property would be worth if fully renovated. You’ll then want to estimate the repair costs and be generous in this estimate. You’ll then want to calculate the maximum offer price, which is multiplying the ARV by 70% and subtracting the estimated repair costs.
So if the ARV of your property was £300,000 and the estimated repair costs were £50,000, then the maximum offer price would be £160,000. Having that profit margin helps to ensure profit is in your back pocket and that you’re mitigating the risks as much as possible.
4. Careful selection of renovations
Renovations and work that you’re doing to the property are something to be super considerate of when it comes to flipping houses. While you might get the property for a steal, you may find that you end up spending more on renovations than you needed to. Ultimately, that lowers the profit potential on the property you’re flipping.
Be mindful of all the renovations you’re planning on doing within the property. Both inside and outside, these renovations will increase the amount you’re spending on the property, and if you’re not able to sell it for more than you’ve invested, then you’re at a loss before it’s even sold.
When you’ve bought a property, estimate the cost of the renovations and ensure that the renovations and work being done all contribute positively to increasing the property’s value. If some work won’t necessarily contribute to the home’s overall value, then it might not be something you need to do.
5. Seek out the right contractors and suppliers
When it comes to successfully flipping houses, it’s good to make sure you’ve got the right contractors in place and the suppliers on hand to deliver all the materials you need for renovations.
Contractors are an important part of the process. Of course, there are advantages to doing it all yourself. However, if you’ve not got certain skills, then you’re better off bringing in someone who knows exactly what they’re doing and, more importantly, will have insurance in place, should something go wrong.
Seeking out the right contractors is one thing, but you’re also going to need to check that you’re using the right suppliers for the materials required. When it comes to supplies, make sure you’re opting for high-quality materials but at an affordable price, so you widen your profit margins where possible.
6. Prioritise kitchen and bathroom renovations
Kitchen and bathroom renovations are often going to be the most effective way of transforming the properties you’re flipping. Whether you’re looking to transform the whole property or just do a few minor renovations for a quick profit, kitchens and bathrooms often lead to the most value on a property.
That being said, you might also want to consider the advantages of adding extensions. These can be more time-consuming, especially where you might need permissions to carry out the work. However, if you’re successful and you have the money to do it, you could add tens of thousands to the property’s value.
7. Start talking with potential buyers or real estate agents
To help get the ball rolling when it comes to flipping houses, it’s useful to know who is out there and to start conversations with real estate agents. This is particularly helpful if you have flipped a property that’s unique or sought after in its location.
Speaking with potential buyers is going to help you get your newly renovated property in front of those who are looking to buy right now. It’s better than waiting until you’ve completed renovations and then starting the process of finding buyers. By getting in the feelers early, you’re more likely to get a smoother process of flipping the property and then selling it.
Make sure you’re connecting with the right agents, too, and that the property you’re selling is one that’s a good fit for their books and experience.
8. Price the property fairly
The property price should be priced fairly, depending on how much you’re expecting to receive versus the reality of the market right now. It’s good to be fair and realistic, but also ensure that the price you’re putting it up for is the right price for you, too.
That means it should at least cover the money you’ve spent on the property and hopefully leave you with some extra profit too.
It’s worth looking at what else is on the market, not just similarly to yours but within the local area. Chances are, if your property has the same number of rooms as a dozen or so other properties in the local area, you’re going to be in competition with them.
9. Be willing to negotiate
Being willing to negotiate is definitely something you want to do when it comes to flipping houses quickly while still making yourself some reasonable profit. You’ll want to know that the price you set for the property might not always be the price you get. Therefore, you have to be willing to drop the price or negotiate with the buyer depending on what they’re looking for.
10. Continue looking for your next property to flip
Finally, it’s always good to be on the lookout for your next opportunity. Try not to get too fixated on this one property if you have the budget and capacity to take on a new project. Ideally, you want to be flipping one property and then renovating another at the same time. That can help to keep the funds coming in and to projects getting better and better.
Successfully flipping houses is a challenge, but if you’ve got the passion and drive, then it can prove to be a wonderfully profitable investment. Use these tips to help successfully flip your first or next home this year.
