Property has always been a favorite way for many people to try to make a quick profit, especially in the field of home flipping. For the uninitiated, this is the practice of buying a home at below the market value, spending a certain amount to refurbish it, and selling it on quickly, at a profit.
While the practice might have fallen out of fashion in the last year or so, along with the average profit to be made, it’s still a pretty good way to make some money. However, there are some definite principles that you need to follow if you’re going to make a success of it.
Choose your area carefully For Home Flipping
There’s the famous saying in the real estate game – “location, location, location”. So the single most important consideration is Home Flipping where the property you aim to flip is. It needs to be an area where property prices are on the rise and, depending on the type of buyer you’re targeting, it needs to have the facilities they’re looking for. For young couples, this could be bars and restaurants, whereas for families it will be good schools and open-air spaces.
Sort out the finances
It’s never going to work if the finances aren’t right. So, if you’re relying on a mortgage for the purchase, make sure to use the services of a mortgage advisor such as Trussle. They can give you advice, calculate and compare mortgages, and direct you towards lenders who are offering the best deals. The less your monthly payments are, the greater your potential profit will be when the time comes to sell.
Stick to the 70% rule
For anyone not familiar with this calculation, it’s how to work out the maximum you should pay for the property you’re going to flip. It equates to 70% of the value of the property when it comes to selling, minus the amount you’ve spent on refurbishments. So, say you aim to sell it for $200,000 and spend $20,000 on repairs. 70% of $200,000 is $140,000 minus $20,000. That gives you a maximum purchase price of $120,000.
Find contractors you can trust
Unless you’re lucky and have all the skills needed to work on the property yourself, you’re going to need help. This means finding and using contractors you can trust and who will do the work for a good price. There are some simple steps you can take to find reliable workers who won’t be trying to rip you off or take too long on the job. It’s also important to build up a good relationship with them as it could turn into a long-running partnership.
Always add 20%
Last but not least, always budget for any work costing around 20% more than you’ve been quoted. Even the most honest contractors can uncover problems that no one was expecting and which need to be sorted before you can sell.
So good luck if you’re thinking of flipping for a living. They always say that the first property you take on is the toughest – but these tips should help everything to go a little more smoothly.
