House flipping is slowly making a comeback in the market and investors are pushing for it. They have taken a renewed interest in this type of real estate strategy due to the rise in home prices.
In fact, ATTOM Data Solutions’ 2016 year-end report shows a 3.1 percent increase in flipped single-family houses and condos from 2015.
What is House Flipping?
House flipping happens when an investor buys undervalued properties, redevelops them at a minimal period, and quickly resells them at a higher price for profit.
Home improvement reality TV shows even added to the hype of the “fix and flip” strategy. It has inspired a lot of individuals and investors to try their hand at it.
There have been success stories with house flipping but it’s not as easy as what a lot of people think. There are risks to it, too.
Is it worth the risk?
Becoming a successful flipper doesn’t happen overnight. Time, knowledge and practice are essential elements to make fixing and flipping homes a success.
Loans, like hard-money or fix-and-flip loans, that will finance this strategy come with risks, too. If not handled carefully, investors and developers could make the properties hard to sell. Situations like these can lead to loan delinquencies.
Keep in mind that it’s not for everyone. House flipping is not as easy as it looks so don’t jump into it immediately Invest in learning the skills and elements necessary to be successful at it, then it might be worth a shot.
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What you need to know
Smart buying is key. Make sure you’re investing in a property that makes economic sense. Purchase properties that are potentially profitable because you’re mainly buying with the intent to sell.
Location is important. This increases the chance of reselling the property. A successful flip counts when the property was sold quickly. If the property’s neighborhood isn’t good, that lessens the chance of reselling.
Get good financing. Those who don’t have enough money as capital for house flipping can get financing for it. Hard-money lenders give short-term mortgages that will finance purchase and rehabilitation costs. There are private lenders that can help you get financing, too.
Hire good and reliable contractors. Successful flippers often look for possible contractors before or during house hunting for homes to flip. Since this is a risky take, you need to get the best people that would give you the best services.
Know the costs. Plan out your budget well and try to go for cost-efficient improvements when you redevelop the property. Keep a timetable during the repair and stick to it. Don’t over-improve because it adds more to the property’s reselling value. You don’t want to end up selling a house that’s priced more than the location’s average.
The goal is to sell the property as quickly as possible. Have a strong marketing strategy. You lose money every day the property remains unsold. Sell the property based on the location’s market values and seek guidance from real estate agents when you list the property.
Flipping houses is a risky strategy. It’s all boils down to having enough knowledge and resources to make it a success otherwise it’ll end up a flop.
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