House flipping is the process of buying old houses, investing in them, and selling them for profit. It sounds simple, but it isn’t easy. This business model has become rather popular these past few years, and if you are a beginner in this business, you should know that there is a lot of hard work involved in it.
Of course, success is possible, but you have to invest a lot of effort and dedication. If you are wondering where to begin, here are the five steps that can help you on your journey of flipping real estate fast and with success.
Write a business plan
You should write a detailed business plan and make a strategy. First, you need to define your goals. If you don’t know where to start, consider using a business plan template, which consists of a summary of everything that should be included.
There are several things that you need to consider. For example, what types of properties you want to work with and in what area. Also, consider your project timeline, and the number of projects that you can handle.
The rest of your plan should include the research on the competition. You need to be sure that there’s enough demand for your business because a lack of demand can ruin your business before it even starts.
Finally, think about the money you need to invest and how much you expect to make when flipping a house. When you make a detailed plan, it’s very important to stick to it.
Get a loan
In most cases, when starting a business like this, there isn’t enough cash to buy a property without a loan.
Here are the three types of loans that you can get at the beginning:
- Hard money loan. This works faster and you can apply online. However, it’s for short periods and it has a little higher rates than a traditional loan.
- Rehab loan. This includes home equity lines of your own home, but they can be used for other projects and they offer fixed mortgages.
- Investment group loan. To get this loan, you need to meet the real estate investors to get all the details about it.
By getting a loan, you’ll be able to close on a property quickly, as soon as you find a good deal. Fix and flip loans are very useful for renovations and non-owner-occupied properties. They are used for business and you can get them from banks or online lenders.
When choosing the loan, you need to review your credit report, save about 25% of the purchase price for the downpayment, and think about which loan suits you best. Finally, you should gather all the documents and submit an application.
Hire house flipping professionals
When entering a fix and flip business, you’ll need a network you can count on to help keep the projects under budget and on schedule to make a profit. Hiring professionals like attorneys, real estate agents, accountants, and contractors is crucial to help you avoid mistakes and ensure that everything is legal.
You don’t have to hire all the professionals right away since most of them are hired per project. An accountant is necessary because they help you file taxes, set up your business structure, and track your expenses.
When you look for an attorney, be sure to find the one that specializes in real estate. An attorney will notice legal details and make sure that there are no mistakes in contracts since those errors could damage your reputation, especially during your first flip.
For a start, focus on the contractors, attorneys, and realtors for your team. When searching for professionals, look for other investors and investment group referrals, as they are your most trusted source.
Choose the right properties
When your business plan is set up and your finances are taken care of, you can start identifying the right properties to flip. Your main focus should be the neighborhood.
Choose one that is convenient for you, and not so far away from where you live and work. The neighborhood should be well-maintained, and it should include parks, schools, and shopping centers nearby to attract buyers and motivate them to pay a higher price.
Add valuable repairs to your projects by building large closets, and adding renovated kitchens and bathrooms because this will increase the value. You can remove walls to make rooms bigger, but also check out houses with a yard space that can be used well.
Buy, rehab, and sell
Now that you have created your business plan and connected with professionals, you are ready to buy, renovate and sell your first property. It takes between 15-30 days using a hard money loan (or cash) to close on a property, and an additional 30-120 to renovate it.
When everything is complete, take pictures and put the property on the market. Depending on the price, the selling can last from a few days to a few months. A real estate agent can support you in finding a house, and assist you later when it’s time to sell it.
When you buy a property that’s suitable and ready for renovation, the contractor rehabs the property. Everything has to go according to plan because every day when you don’t sell is a day of paying carrying costs. Avoid slow renovations, because in this business, the faster you sell and get a profit, the faster you find another property to fix and flip.
In the fix and flip business, planning and organization will make or break your projects. House flipping needs a good strategy and professional team that you can rely on.
By following these five steps and approaching the process with a detailed strategy, everything will operate smoothly. The more confident and experienced you are, the more adjustable you’ll be to those unexpected circumstances that will inevitably arise. Remember that the key is in good preparation.