Flipping properties for profit can be a lucrative business if you’re knowledgeable about the process of renovations and repairs. The key is to educate yourself on what you need to look for in a fixer-upper, how to calculate a budget, and how to tell which renovation tasks are best left to the professionals.
Know What You’re Looking For
A major factor in your success as a home flipper will be your ability to find a property with great potential that may not look like it at first glance. It will also be essential for you to understand what you should stay away from. Many flippers choose fixer-uppers that need a lot of work because they are less expensive than the other options, but this also means you’ll likely have major repairs on your hands that will inflate your expenses. Not only that, you may get stuck with a house that has structural issues, which can be extremely difficult to fix. Do some research on what you’ll need to look for, and be sure to add a bare minimum of 35% to your budget to account for costly, unforeseen repairs to the electrical work, plumbing, or HVAC system. This will also come in handy should you come across mold or insect infestations.
Make the Right Additions
While knowing what to look for is crucial, it’s also important to know what buyers will be searching for when they’re touring properties. Updating the kitchen is a great way to draw interest, and this can be done without breaking the budget by adding laminate flooring, a do-it-yourself tile backsplash, or an attractive range hood to the stove that will ventilate grease, smoke, and odors. These are great examples of updates that won’t put you over budget but will make a big impact on potential buyers.
Explore Your Funding Options
Once you know what kinds of changes you want to make to your property, you’ll have a good idea of how much funding you need. Buying in cash is always ideal; it enables you to get a better value, spend less time under contract, and carry zero debt during your renovation process. Taking out a loan can be a complicated process, so if you have not saved up enough capital to buy in cash and insist on taking out a loan, prepare as much as possible by boosting your credit score and getting all the relevant paperwork together. There are several loan options available and they may vary according to which state you live in and whether you’re a first-time homebuyer, so explore every avenue before making a decision.
Grow Your Business
Property flipping is a business and should be treated like one from the onset of your venture. Forming an LLC, S-Corporation, C-Corporation, or other pass through entity can provide tax benefits while protecting your personal assets in the event of litigation, but you’ll also need to consider what your operating agreement will be. This document will be shared with the state and will establish how you’ll run your business, but it will also prevent costly misunderstandings by clearly stating the duties and obligations of both yourself and your partners.
Buying a property in order to fix it up and flip it is a big decision, and the process can be expensive and time-consuming if you’re not well prepared. Do your research, arm yourself with the right resources and tools, and get the help of pros for certain tasks to avoid any issues.