2. Understand the Market
Many house flippers are so focused on their next job that they overlook the less attractive part of the profession. However, if you don’t grasp the market and real estate trends in your area, you may encounter the following problems:
You’re not sure if you’re getting a decent bargain on the house you’re buying. When the house is listed at market value, the sale price should be low enough that you can perform the modifications and yet come out ahead.
You are unable to precisely estimate the home’s prospective value. Your idea for the home must be compatible with the neighborhood’s reality and the ability of the neighborhood’s residents to afford the home you design.
You have no idea how to price the place. If you acquired a house in a community with predominantly $130,000–150,000 properties, you should price your flip at the lower end of that range when the time comes to sell.
So, how can you have a thorough understanding of the market in order to execute a successful flip? Find a real estate agent in your neighborhood who has years of expertise. Your agent can assist you in narrowing down your property search to the right neighborhoods based on your price range, renovation budget, and anticipated profit.
You may believe that the house you spotted online is a steal for $145,000 and has a lot of potential. (Imagine what it would look like with a new kitchen!) However, if the nicest and largest house in the neighborhood sold for $160,000 three months ago, any modifications would most likely outperform the neighborhood. And you’d be stuck with a home that couldn’t be sold.
Working with a real estate agent that understands the market like the back of their hand pays dividends. When you’re ready to sell, your agent can use their expertise to price your home competitively so you obtain top money. Working with a top-tier agent can assist you in making a wise investment that will keep your finances on track.
3. Create a House Flip Budget
Don’t put off creating a budget until after you’ve purchased an investment property. Before you sign the dotted line, determine your price range for acquiring a home, making necessary repairs, finishing renovation projects, and paying selling costs.
Make a list of any cosmetic projects as well as any costly overhauls, such as plumbing or electrical issues. If you don’t have any construction experience, a contractor can tell you what needs to be fixed and how much it will cost. Surprise repairs may make or break a flip, so do your research here.
Get a house inspection and any other specific examinations you may require once you’re under contract. It is always preferable to detect problems early on rather than being caught off guard later on.
