Buying property and remodeling it to sell for a profit is known as “flipping,” and it can be quite a lucrative business if you know how to make it work. For those who are considering starting a property flipping business, there are a lot of important elements to think about before you delve in. From understanding your local real estate market to business budgeting, every step of the flipping process is crucial to being successful. Read on to learn more about how you can turn your flipping hobby into a profitable, full-time gig.
Know Your Costs and Start a Budget
When you’re starting the flipping process, you’ll need to draft a budget before you begin. Just like any other business, having a budget in place and understanding the expected costs in advance can set you up for success. Remember to plan for additional, unexpected costs as well, such as finding asbestos in the home or running into plumbing or electrical problems. Every home has its own unique quirks, so you should be ready to pay more than you expect for repairs and other things that may come your way. Sit down and draft a budget and include your costs for everything including labor, materials, and finishes. When you have this all laid out ahead of time, it’s much easier to shop for materials and services when the time comes to start working on your flip.
Know Your Market
Any successful property flipping business knows their local real estate market. For example, if you’re selling your flip in a high-end neighborhood, it’s worth it to spend more on better finishes like solid-surface countertops and luxe appliances. If the market doesn’t call for such expensive updates, you can spend a little less on your home makeover. Pay close attention to what other homes in the same area are selling for and look at the most recent comps. A local real estate agent can provide you with a comparative market analysis so you have a better idea of what your asking price should be when all is said and done. Remember that in real estate, the market is king. If you end up overpricing the home, it could sit for a long time and ultimately cost you more money in the long run.
Draft a Business Plan
Whether you’re flipping houses or selling products, you need a solid business plan in order to be successful. When you create a business plan, it provides you with a clear guideline that can help you with your goals and your overall vision. A good business plan should include the following:
• Your mission statement: What are your goals, your purpose, and what is it that you want to achieve? This is your mission statement.
• Company summary: State your company name, contact information, your line of work, and any other important information.
• Growth or projected growth: Even if you’re new to flipping homes, include a chart or graph that indicates what you expect your growth to be over the next year or several years.
• What you offer: Explain in detail what you’re offering, your services, and how it can benefit customers and the community.
• Finances: Put your finances in the business plan and include things like any investments, projected costs, and projected profit.
• Looking to the future: Discuss where you see your property flipping business in the future and include detailed information about what kind of growth you plan to see in the coming years.
Every business plan is different, but these main elements should always be a part of your overall plan. When you come up with a business plan, it’s much easier to get financing. A business plan provides a synopsis of what you do, and it’s also a great way to give you something to look back on if you need guidance. You can always change your plan as you go and as the business grows.
Don’t Forget Some Business Basics
Once you’re committed to a full-time property flipping business, there are several things you’ll need to do. First, set up your business name, entity, and bank accounts. Create an online presence and start marketing yourself online and in person. You may want to get some custom business cards you can use to hand out to realtors, service workers, and at trade shows. Consider getting a custom logo designed that will give your business an identity and a recognizable presence. All these simple things will help everything come together so that your flipping business is established and real. Keep your business bank account separate from your personal one so that it’s easier to manage expenses, profits, and taxes. If you don’t have the capital to start, look into applying for loans, including small business loans, that can help you get started and on the right financial footing.
Set Yourself up for Flipping Success
The key to a successful property flipping business is to understand your local real estate market and to have a good working knowledge of how to update a home. From a huge Victorian home to a modern high-rise condo, the potential to make property flipping a full-time gig is out there. As long as you have a solid budget and business plan in place, you’re already well on your way to making a profit. Get a good understanding of what buyers want so you know your hard work and effort will be worth it in the long run. Remember that every successful business relies on a great team, so surround yourself with professionals you can trust. Over time, you’ll build lasting relationships that will be mutually beneficial for everyone. With some hard work and determination, you can flip houses in your market and enjoy a healthy profit.