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Tag: flipping houses

Mastering Residential Real Estate Flipping: 10 Essential Keys for Success

Flipping houses has become more than an investment strategy. You can’t swing a hammer these days without hitting a flashy, somewhat glamorous depiction of beautiful flipped homes on television and social media. But flipping residential real estate is more involved and challenging than the half-hour TV shows and 90-second TikTok clips would have you believe. To succeed at residential real estate flipping, you’ll need to keep these 10 keys in mind.

READ: How to Reduce Real Estate Investment Risks — 12 Expert Tips

1. Research first

Successful residential real estate flipping begins with lots of research and planning. Don’t let the excitement of a new project cause you to leap before you look. Take the time to research the market in which you plan to invest, looking at property values and the types of housing that are more likely to sell. This research also should include looking for up-and-coming neighborhoods with the potential for a higher return on investment. 

READ: Identifying Emerging Real Estate Markets — Key Indicators for Lucrative Investments

2. Build a better budget

Flipping residential real estate requires more than the capital to cover a home’s price. Many new investors neglect to include the total cost of renovation (including a 10% margin for overage), taxes and utilities during the rehab, and how much it costs to sell the home once it’s done. Build a better budget by including these expenses and extra funds to cover unexpected costs.

3. Don’t pay too much

Don’t start your flip already in the hole. There are various ways to determine if a potential property is worth the money. Use the 70% rule (only paying 70% of a house’s projected after-rehab valuation for the initial purchase), taking into account the home’s location and size, as well as real estate trends in the area. It also helps to find the right loan for your property to ensure you aren’t paying too much as you rehab the house.

READ: 4 Biggest Risks of Real Estate Investing in 2023 and How to Minimize Them

4. Assemble your team

Teamwork makes the dream work, and nowhere is that more accurate than in residential real estate flipping. Even if you’re a skilled contractor who can easily envision the final product, you’ll need a team of reliable people working with you to bring that vision to life. This includes a real estate agent, skilled people in the trades, an accountant and a knowledgeable closing attorney. Once you have a team in place (and a couple of flips under your belt), you might start to expand your investments, buying multiple homes in cash to maximize profits.

5. Move quickly

You have a plan, and you have assembled your team. Now it’s time to move quickly. The faster you can complete a renovation or rehab and get your flip to market, the less you’ll pay in holding costs, such as utilities or taxes. 

6. Don’t skimp on quality

Although working quickly is key to maximizing your profits, it doesn’t mean you should skimp on quality or cut corners when it comes to your rehab or renovation. Many unscrupulous residential real estate flippers focus on cosmetic updates and ignore structural issues or dangerous problems with a home’s utilities. For best results, ensure your work balances quality with speed, and that all local codes and building regulations are followed. 

READ: 4 Biggest Risks of Real Estate Investing in 2023 and How to Minimize Them

7. Price it properly

Pricing a flip appropriately when it’s completed is essential. Price it too low, and you won’t make the profit you need to move on to the next property. Price it too high, and people will either choose to rent over buying or find another property altogether. 

8. Mind your marketing

It doesn’t matter how gorgeous the property is or how fine your craft is if you don’t market your flip well. Hire a professional photographer to take pictures and videos, then use a web designer and social media expert to create and promote interactive tours. Make sure your marketing targets your potential buyers, and make it easy for them to get in touch via email, DM or phone call.

READ: Promote Your Real Estate Business — 5 Best Digital Marketing Strategies

9. Negotiate carefully

You will, of course, need to have a number in mind when you price your property, but be prepared to negotiate that number and the terms of the sale. This might mean accepting a slightly lower price for a faster closing (which saves you carrying costs), or it might mean holding on to the property for a full-price deal. 

10. Learn from the process

Investing in real estate is a process of continuous learning. Those who are successful in residential real estate flipping know that the market is constantly changing, with new technology, trends and regulatory changes adding to its complexity. Stay open to the lessons each residential real estate flip can teach you. Successes and failures both offer a chance to get better at what you do.

 

Screen Shot 2021 12 28 At 113128 AmLuke Babich is the Co-Founder of Clever Real Estate, a real estate education platform committed to helping home buyers, sellers and investors make smarter financial decisions. Luke is a licensed real estate agent in the State of Missouri and his research and insights have been featured on BiggerPockets, Inman, the LA Times and more.

Tips for house-flipping during COVID-19

The pandemic certainly isn’t slowing down the Denver housing market. According to the Denver Metro Association of Realtors (DMAR), this past July set a record for the total number of closings that month and, at the same time, the average single-family home sale price soared above $600,000 for the first time.

With numbers like those, it’s no surprise that housing demand in Denver is breaking records. To that end, house-flipping in the area continues to be a great investment. If you’re thinking of getting into the flipping business, read on below. Here are six tips to help you find the best flips during the pandemic.

Take advantage of low interest rates

Before you can buy a home to flip, it’s crucial to get your financing in place. Luckily, right now the interest rate environment is favorable to investors. In fact, interest rates are at near-historic lows. The interest rates for 30-year, fixed-rate loans have hovered between 3.0% and 3.25% for the last few weeks, according to statistics from the Mortgage Bankers Association.

If you don’t have enough cash to buy a property to flip outright, you should take advantage of current interest rates and secure financing that is both reliable and affordable. The record-low interest rates won’t last forever, so take advantage of them now before it’s too late.

Focus on finding a deal

Remember, real estate investing is all about the math. Especially when you’re flipping a home, it’s helpful to find a property that’s listed below market value, which can be difficult in the current seller’s market, where buyer demand is higher than home inventory.

In light of that, you may want to consider focusing your search on off-market properties, which tend to hit the market at a lower price point. As the name suggests, off-market properties aren’t listed on the MLS, but you can find them by browsing property records, launching a direct marketing campaign, or networking with wholesalers.

If you don’t focus on off-market properties, you probably won’t be the only one interested in your favorite listings. Odds are, you’ll be up against other offers. With that in mind, you may want to think about waiving your contingencies or offering to pay the seller’s transfer tax in order to make your offer stand out from the crowd.

Act fast

In seller’s markets, homes tend to sell quickly, and you’re more likely to get into a bidding war. If you don’t act quickly when you see a home you’d like to flip, you will likely lose out.

In markets like the current one in Denver, even fixer-uppers go more quickly than usual. That said, when you eventually do find a deal that piques your interest, it’s important to make sure you’re ready to make a move.

For best results, a service such as Zillow or Redfin will allow you to set alerts on your property search so that you’re notified as soon as a relevant property comes on the market. When it does, do your best to clear your schedule; the sooner you can get out to see the potential property, the more likely you’ll be able to submit an offer.

Find the right contractors

Once you’re under contract, your next step is to find the right contractors. Unless you’re a very experienced flipper, you’re going to need some help. Focus on finding contractors who not only give you a fair price but who also have the time to get the work done.

With the unemployment rate in Colorado at 7.4% as of July, more contractors might be looking for work than before the pandemic. Still, you’ll want to get multiple bids for the project as well as references.

Here, your goal should be to go with the contractor who offers the best mix of quality and value. Find ones who will get the work done both within a reasonable budget and on time.

Set a budget

After you’ve gone over all of your estimates and found the right home to flip, the next step is to create a budget for the project. Without a budget, it’s too easy to put too much money into the property and end up selling for less than you’ve invested. If you want to make a profit off your flip, it’s important to keep your spending in check.

However, keep in mind that every renovation project comes with unexpected costs. To that end, be sure to leave a little wiggle room in your budget for the unexpected. Generally, experienced flippers tend to leave at least 10% of the project cost for incidentals.

Choose the home improvement projects that have the most impact

Finally, not all home improvement projects are created equal. Although Denver has one of the nation’s hottest real estate markets, your flip will sell for more if you cater to the needs of your potential buyers.

To do that, conduct sufficient market research so that you understand what type of buyer is interested in moving into the neighborhood where your property is located.

Additionally, on a more general level, you’ll want to focus on doing projects that have a good return on investment (ROI) — such as a bathroom or kitchen remodel — as opposed to those that may be geared toward your personal tastes.

The Bottom Line

While flipping homes is not an easy business, investors who are willing to put in the hard work can earn great returns, especially in a hot market like Denver.

If you’re in the market for a property to flip during COVID-19, use the tips above to ensure that you set yourself up for success and sell your home successfully.