Are you thinking about getting into real estate investing? The trend of flipping houses goes up and down with the market. In 2019, the year before the pandemic, home flippers flipped 245,864 single-family homes and condos.
Today, it’s cooled off a little with the supply chain issues and sky-high costs but you can still be successful at it. Find the right home, do the work to rehab it, and make a profit.
Sounds easy, right? Not so fast. There are some risks involved. Use careful planning and available resources. Keep reading to learn how to flip a house, and secure a fix and flip loan.
What Is House Flipping?
In the typical house flipping scenario, a buyer purchases a home that’s in need of repair. These distressed properties usually have a lower price tag. Sometimes they are foreclosures, short sales, or auctions.
The buyer fixes up the homes to make them move-in ready and attractive to potential buyers. The goal is to do all this in a timely manner at the lowest cost. Reaching this goal means there’s a good chance that the resale price earns the seller a profit.
Things That’ll Help You Be Successful
It’s important to reduce your financial risk and take the proper steps to make this a successful and profitable business venture.
The 70% Rule
As an investor, a good rule to follow is to never pay more than 70% of the after-repair value of the property minus the necessary repairs.
Say you’re looking at a home that will have a value of $300,000 after it’s renovated but it needs $50,000 in repairs. 70% of that is $210,000. After you subtract the $50,000, you have a total of $160,000. Do not pay more than that to purchase the home.
Get to know the neighborhoods. Know the ones where you’re sure to make a profit.
Do You Have The Right Skills?
What knowledge do you possess related to house flipping? Having a good understanding of construction, real estate, and design are helpful. If you don’t have these skills, find the right professionals who do.
Fix And Flip Loans
If you’re worried about having the capital to get into real estate investing, there is another option. Fix-and-flip loans are short-term loans. They allow the borrower to purchase and improve a property in order to then sell it for a profit. These loans are exclusive to residential real estate investors.
The types of improvements covered range from minor renovations to a complete reconstruction of an existing home. If you’re ready to flip more homes and increase your sales, get financing in the form of fix and flip loans and make it easier to take your house flipping business to the next level.
Buying And Flipping Houses
Buying and flipping houses can be a great business option if you do it with a plan and careful financial considerations. Getting the right type of loan with a good interest rate makes it easier to fix and flip houses and make a profit. It’s not something to jump into without a strategy.
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