[Property Investing] The What, Why, and How of House Flipping
There are a number of ways to make money in real estate. Aside from the traditional route of buying rental properties, flipping houses — though considerably risky — is one of the popular ways of making money. In this blog post, we’ll tackle the what, why, and how of house flipping as an investment strategy.
What is House Flipping?
House flipping is the process of buying, rehabbing, and selling properties for profit. Real estate investors buy properties below market price, make aesthetic improvements to increase its value, and then resell it for profit. It is, however, not a “get rich quick” plan. House flipping takes a lot of work, a lot of investment, and perfect timing.
House flipping is best suited for investors with a large cash reserve, have a good eye for design, and great negotiation skills.
Why House Flipping Can Be Profitable?
If done correctly, a successful buy-fix-sell can provide very large profits. Flipping homes can be lucrative business. An investor can make a significant returns on investment relatively quickly, given the right timing.
House flipping can help you develop your skills. It will take a lot of time and money, but there is a lot of valuable experience to be gained, including increasing your knowledge in construction and real estate. House flipping can also help you develop your negotiating skills as well as project management and time management skills, which will translate to all kinds of businesses you may dive into in the future.
What to look out for
Flipping houses can be fun, exciting, and inspirational, but very dangerous if you don’t do it right. Make sure to calculate how much money you can spend on renovations and still make a return. Purchase properties sensibly and don’t spend too much on renovations.
Some factors to consider when buying a property for flipping include your target market’s needs, surrounding developments (distance to schools and universities, shopping centers, healthcare facilities, etc.), and future growth (future roads and commercial establishments).
How to Effectively Flip Houses
Step 1: Plan
Figure out what kind of property you are going to flip, how much you can afford, and how are you exactly going to complete it. Research about your target market. Where are they buying houses? What kind of properties are they buying? What are their non-negotiables when they go house hunting? Until you answer these questions and formulate a concrete plan, don’t jump into house flipping. Do not base your decision on what they show on reality TV.
Step 2: Buy smart
It is important that you take time to study your local real estate market. Learn how to spot a good deal. Know your home financing options. Analyze how much you can afford and how much you can afford to lose on any deal.
A good property to invest in should be in a good location, meaning in close proximity to place of work, good schools, and/or shopping areas; with convenient access to local transport hubs; with water access; and in a safe and secure neighborhood. As much as possible, purchase a house that in in general sound condition and will require only minimal upgrades or innovations.
Step 3: Have a Timeline
The objective of house flipping is to sell effective as quickly as possible. Create a realistic timeline and set times for contracting, renovating, and selling.
Step 4: Renovate the house
Prioritize the fixes that will quickly increase the value of the home you are flipping. Spruce up the property with renovations that would make it more appealing to your potential buyers.
Step 5: Sell the house
Sell the property for a significantly higher price than the purchasing cost. Research the prices in the neighborhood, and seek the help of realtors. Hopefully, if you had a great plan and managed your flip effectively, you will sell it quickly.
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- How to Make Money in Philippine Real Estate
- 5 Renovations That Make Money