When I first started flipping houses, I had no idea what I was getting into. I watched a lot of HGTV and had fantasized about becoming an independent real estate investor who didn’t have to report to a boss or punch a timeclock. Flipping houses seemed like a quick and easy way to get started. I didn’t realize how many steps were involved—from finding good deals on real estate to creating a business plan, and then trying to market and sell a property on my own.
I still believe in house flipping as a way to gain financial independence and get started in the world of real estate investment—you just need to be more prepared than I was. That’s why I’ve created this guide to flipping houses so you can learn from my mistakes and make better decisions.
Making the Decision To Flip a House
There is a perception of house-flipping as a quick way to make easy money thanks to the popularity of home improvement TV shows. However, the reality is that it isn’t an overnight process, and most real estate investors don’t earn a large amount on their first house. But, if you’re smart about your investments and you continue to flip houses, there is potential to earn a significant return on investment (ROI) over time.
Though flipping houses is hard work, there are many benefits. Maybe you’re drawn to flipping houses as a career because you want to be your own boss, or you’re seeking more excitement than a 9-to-5 office job can provide you.
Another popular real estate investment is income properties—purchasing a single or multi-family home and renting it out. This option is appealing to some new investors who are intrigued by the idea of a regular monthly income. But how does investing in a rental property compare to the ROI from flipping houses?
As a new investor, you may not be ready to quit your day job to pursue flipping houses full-time. Flipping houses part-time could be a way to earn extra money for vacations or other splurges, save for your child’s college fund, or transition from an office job to a full-time real estate investment career.
How to Get Started: Your Guide to Flipping Houses
Before you jump in and buy your first house, you need a plan for finding investment properties, hiring contractors for renovations, and researching other important details that help ensure a successful flip. One of the best ways to get started is with advice from expert real estate investors.
Many new investors run into some common pitfalls when they start flipping houses. From overestimating your ability to renovate a home on your own to underestimating the costs to carry a flip, there are rookie mistakes you need to be aware of so you can avoid making them yourself.
If you’re starting your own fix-and-flip business, you’ll need the best training, tools, mentorship, and leads. But how do you find all of these resources if you’re new to the game and don’t have any contacts in the field?
Training is crucial as you start your house flipping business. There are many real estate investment and house flipping training programs that claim to have all the answers, but if you don’t have any experience in the field it can be hard to tell which programs are worth it.
Mentorship is a great way to learn more about the house flipping business with one-on-one guidance from an expert. A quality mentor will be there with you every step of the way as you work through your first few flips.
Formulate a Business Plan
Many new real estate investors are intrigued by the idea of wholesaling—buying a property at below market value and selling it quickly to another investor without making any repairs—because it seems easier than renovating a house for the first time. How does wholesaling compare to house flipping, and which strategy should you model your business around?
Before you jump into flipping houses, you should develop a robust business plan. If this is your first business, you may need some guidance on how to write a business plan and what information should be included.
Choose a House to Flip
Once you’ve launched your fix-and-flip business, you need to find a property to invest in. The best deals probably aren’t listed on the MLS (multiple listing service), which is why many investors attend real estate auctions, buy lead lists, advertise online, and employ other creative strategies.
Before you buy a house, you need to make sure the price fits your budget. Many real estate investors use the “70 Rule” to help them ensure a good ROI.
Setting a firm but reasonable budget for your flip will ensure you don’t let unexpected costs eat into your potential ROI. You need to account for all the costs of flipping a house, including carrying costs, financing fees, and renovation costs.
The best way to maximize your profits from flipping houses is to buy low and sell high while saving as much money as possible on your renovations and carrying costs.
When it comes to paying for your investment property, you have several options. Paying in cash helps you avoid interest and other financing fees, but most first-time home flippers don’t have enough cash on hand to purchase a house.
A fix-and-flip line of credit is one way to finance your investment property. Before you go that route, however, you should understand the pros and cons and how a fix-and-flip line of credit compares to other methods of funding.
Renovate the Flip
While you’re renovating your flip, you need to insure the property against damage. A typical homeowner’s insurance policy won’t cover vacant investment properties, however. You’ll need to purchase a different type of insurance policy when flipping an unoccupied house.
Renovating the kitchen is one way to make a big impact on the value of your flip. You shouldn’t start the remodel until you’ve estimated the costs to ensure the best ROI from your investment property kitchen renovation.
Complete the Flip
In addition to finding, purchasing, and renovating a house, you also need to market and sell the property. And after you’ve sold the house, there are still pesky capital gains taxes to worry about.
Joining a Network of Experienced House Flippers
When I first started flipping houses, I did everything alone. I thought becoming financially independent meant that I shouldn’t rely on anyone else but myself. Then I was introduced to HomeVestors® and the benefits of becoming an independently owned and operated franchise. HomeVestors® provided me with all of the tools and support I needed to grow my real estate investment business and flip houses with confidence. With the assistance of the UGVilleSM proprietary platform of real estate investing tools and the mentorship of a HomeVestors® Development Agent, I found the process of flipping houses and maximizing my ROI so much easier.
Are you ready to join a network of veteran real estate investors and meet the HomeVestors® Development Agent who can be your guide to flipping houses? Contact us today to find out more about becoming a HomeVestors® independently owned and operated franchise.
Each franchise office is independently owned and operated.