It's one thing to watch a one-hour show of a house flip, and another to roll your sleeves up and take on this process yourself. TV shows and success stories only show the highlight reel of flipping houses for profit. But, there's a lot more that goes into this line of work than what meets the eye.
A successful house flip requires you to be a smart home buyer, designer, and seller all in one. It means you have to know how to see value in a home that most people wouldn't take a chance on and turn it into something buyers will get into a bidding war over. You also have to be smart with budgeting your money and your time.
It's a lot to take on, but it's worth it when you do so correctly.
Here are all the steps you need to follow to succeed at flipping houses for profit.
1. Establish Your Financial Goals
Before you get into design plans and creating a project timeline, you have to take a look at your finances. Consider how much money you're willing to put into a property's upgrades, and estimate how big of a profit you're expecting to get.
Explore additional financing options via banks and brokers, but try to avoid racking up a lot of debt. You also want to set a clear price range for the homes you're looking to buy and do your best to negotiate purchase contracts down.
2. Research Your Local Market
Remember to research the real estate market in your local area before you finalize your personal financial goals. It's hard to flip a house and sell it for $120,000 if the average buying rate in your area is between $90,000-100,000. Not to mention, you'll be hard-pressed to find an affordable home to flip if the real estate market is healthy (and expensive).
The more you know about the area in which you're operating, the better you can make your estimates. Plus, you'll be more prepared to meet the needs of potential buyers once you're ready to sell.
3. Purchase Homes with Profit in Mind
Speaking of selling a property, always keep the 70% rule in the back of your mind. This helps you create the best possible return on investment whether you're selling a home for $250,000 or $125,000.
The 70% rule of house flipping means you should never purchase a property for more than 70% of its ARV (After Repaired Value) minus repairs. If you plan to sell for $150,000, for example, you should purchase the home for $105,000 minus the amount of money you plan to invest in it. If repairs would cost $40,000-50,000, you're looking to make an initial purchase of $55,000-65,000.
4. Connect with Reputable Contractors
Once you've established how much you're willing to put into repairs and the final price you're looking to sell for, you can get to work. The best way to ensure everything goes as planned is to work with reputable contractors and to take on some of the work yourself.
Learn how to do a proper demolition or hone your flooring and painting skills. Maybe take on the landscaping and exterior needs of house flipping and hire professionals to do everything on the inside.
Whatever you choose to do, you need to trust that your contractors can pick up the slack - and do so in an impressive manner. More so, make it a point to build long-term relationships with these professionals. An ongoing connection is in both of your best interests.
5. Handle All the House Staging and Selling Yourself
Although it makes sense to hire contractors for things like plumbing and HVAC repairs, it is smart to save your money for services you can do yourself. If you want to become a successful house flipper, you need to be great at selling. A lot of the final sales price comes down to how well you can stage a home and market it.
Staging a flipped house means putting all the final pieces on it before buyers come in for a viewing. It requires you to do things like put fresh fruit in the kitchen or have a few candles burning throughout the house. Anything that you can do to make the space feel homey and welcoming is a good move.
From there, you have to learn how to pick out seriously interested buyers from those who aren't as strong of a lead. Then, it's time to talk contracts.
6. Work on Your Negotiation Skills
Don't rush the sales process. As much as you want to sell your flipped house quickly, you also want to get the most money you can for it. This means you need to learn more about real estate sales and build your negotiation skills.
You won't always be able to make a buyer meet your initial expectations. But, you should be able to squeeze an extra $5,000-$10,000 in addition to their first offer. This may not seem like too much of a difference in the grand scheme of things, but it does add up!
7. Market Your Business
The final thing to do in order to succeed at flipping houses is to make yourself known. You don't plan on flipping just one house and calling it quits, do you?
No! You're going to get much more out of this process if you do it long term. So, you have to build your brand and gain leads for your business.
This means focusing on more than just one property at a time. It means you have to make lasting connections within the local real estate market and build your personal brand. You should focus on becoming a trustworthy, reputable seller just as much as you need to find potential buyers.
Flipping Houses for Profit and for Personal Use
Here's an interesting thought: what if you bought a fixer-upper for yourself instead of flipping houses for profit all the time? As you're exploring the market and finding run-down homes with a lot of potential to make a good sale, consider the possibility of keeping one for yourself.
This makes perfect sense if you think about it. It's an ideal opportunity to expand your home to better fit your family or to finally create the dream house you've always wanted.
If you're more interested in staying where you are and focusing on flipping for profit, click here for real estate tips to help you succeed.