Flipping houses can be a lucrative business if you’ve got the skills and knowledge to do it. A lot of people imagine that buying a home, fixing it up and selling it is simple though. The fact is that flipping homes is not a business you should get into without a considerable amount of forethought and planning.
That same planning process is important even if you’ve flipped homes before. Every new project you take on can make you money, but not every project is going to line your pockets. If you’re not careful, you could lose money or find yourself sitting on an investment for a lot longer than you imagined.
Use this guide to learn more about the top 5 questions to ask before flipping a house. From first-time flippers to experienced pros that turn around dozens of homes each year, these are must-ask questions that can help ensure you make sound financial choices with your money.
Aske Yourself These Questions Before Flipping a House
1. Are Your Finances in Order?
Buying any sort of property requires money. Whether you’re using your personal money, working with an investment team or generating cash flow another way, you need to get your finances in order before you start shopping. That way you’ll be ready to buy when you find the right home that can maximize your profits.
Here are some things to consider when taking stock of your finances:
Can you get a loan to flip a property?
For many people, personal bank or small business loans are an excellent way to get the money needed to buy property. Have you been approved for a loan? If so, how much money do you have available? How much can you spend on property purchases versus upgrades and repairs?
Do you have investors or team members?
If so, you’ll need to work with them before you start shopping for property to ensure that they’re willing to invest along with you. You’ll also want to verify how much they’re willing to spend.
Are you spending your own money?
If so, are you willing to gamble on an investment that may not earn as much as you’d like? Flipping homes is often lucrative, but unknown issues, down markets and even catastrophes and natural disasters can put you in the red at the end of the sale. Ensure that you’re willing to take the risk with your own personal money if you go this route.
Do you have enough money to make essential repairs and upgrades once you’ve found a property you want to buy?
Flipping a home almost always means buying low and spending money to make repairs and upgrades that allow you to sell that property for more money.
Have you figured out what your budget looks like for buying a home versus making repairs and upgrades?
Can you stick to your budget? Think like an investor aiming to maximize profits and not a homeowner.
2. How Long Will it Take to Get Your House Ready to Sell?
How long does it take to sell a home? This is one of those very important questions to ask before you flip a house. Unfortunately, there’s no set time that you can bank on when you’re planning to flip a home. That’s especially true when you factor in any renovations and repairs that you plan to take on.
Here are some of the things to consider when trying to determine how long it will take to get your house ready to sell:
How much work needs to be done in the home?
Are you replacing small items like sinks, toilet fixtures and overhead lighting, or are your diving into major renovations like flooring? Perhaps you need to do a combination of both to maximize your profits?
Do you have structural or internal issues to take care of?
These are notoriously slow, and a home with lots of internal problems can take months to sort out, especially if you can’t do the work yourself. Faulty plumbing, electrical issues and structural problems can be very costly as well.
What about exterior maintenance?
Paint, roofing, driveways, windows and landscaping all add to a home’s curb appeal, which can help your home sell faster for more money. Making these upgrades will cost you money and mean more time before your house can hit the market though.
Are you staging the home?
How long can you afford to stage a home before you sell it? Staging a home can add up and eat into your profits over weeks and months.
3. Have You Done Your Market Homework?
Your market matters and you know it. Of course, markets change over time, and the information you were working on last year may no longer be relevant. That means regularly doing your market homework before you buy. Here are some of the questions to ask yourself:
• Are home sales up or down? What about in different areas within your city?
• How much are homes selling for? Is that sale price on the uptick or downswing?
• How long does it take for the average house to sell? Does this vary dramatically from neighborhood to neighborhood?
• How many homes are for sale in your area? A flood of homes on the market can signal a lack of demand, which could result in falling prices. It might also mean that your home stays on the market for a long time before it sells.
4. Do You Have a Strong Team?
Flipping a home is rarely something you can do entirely on your own. That’s why you need to have a strong team on your side. Here are some of the must-have pros that can help you flip homes successfully:
• Investors. Not everybody needs investors to flip homes, but if you do go this route, you need strong ones on your team. Look for investors with flipping experience so you can utilize their years in the business.
• Real estate agents. Finding the right home to flip isn’t easy. Some homes don’t even hit the market before they get snapped up in busy areas. Work with a skilled real estate agent or team of agents to find properties that meet your criteria quickly.
• Contractors. From a general contractor to electricians, carpenters and plumbers, having skilled tradespeople you can call is a must. Get in touch with these individuals before you buy to check availability. Otherwise you could end up waiting on repairs for a long time.
5. What Can You Do Yourself?
A skilled team can help you flip houses faster and take care of tasks that just don’t match your skillset. There probably are an assortment of things that you can do on your own when preparing a home for sale though.
Take a little DIY initiative to tackle tasks that you might otherwise pay people to do. Good at landscaping and yard work? Dive in while your contractor takes care of the inside of the home. Great at interior design? Scout fixtures, flooring, tile and paint.
Doing these things can help you save money that will end up in your pocket down the road. Just don’t get too wrapped in doing it all yourself. Remember that the goal is to get your home up to muster quickly so you can sell it ASAP.
Ready to take on a new home flipping project? Reach out to us at BuildDirect today. Our trained professionals are waiting to help you start your project so you can finish up fast and get your home on the market.