There are several options when it comes to investing in real estate, including buying properties and renting, holding those homes for an extended period of time and then selling, or opting for the quick fix and sale - a tactic also known as home flipping.
This latter method has had its fair share of ups and downs in terms of popularity, as many budding professionals once took advantage of the wealth of discounted properties following the Great Recession. However, interest in home flipping waned slightly as the market rebounded, removing much of the inventory that made this method so profitable in the past. Even so, there remains plenty of opportunities to become a successful home flipper, and the best can find ways to make money no matter what the market is doing.
In order to join their ranks, here are a few tips and tricks to become a skilled home flipper in today's housing market:
Learn where flips go wrong
Like with any profession, there are ups and downs - and a few key mistakes can hamper even the most expert flipper. For beginners, or those looking to grow their profits, not planning ahead and running into several common issues can stop the project before it ever gets off the ground.
For example, too many flippers forget to budget both time and money, according to Lisa Smith in an article for Investopedia. This type of investing can be costly, as flippers must find a way to buy the home without a large upfront price, and getting a low-interest loan can be tricky. Other people opt to pay all cash, but not everyone has that much money to invest. So, the best in the business know how to find homes for sale and afford them without sinking their budget.
Furthermore, many professionals forget about time. If there is a loan involved, that means interest - and the longer the home isn't on the market, the faster money is slipping away. Smith wrote that home flipping is a major time investment as well. There is the search for a property, the acquisition process, the repair stage and then listing it again. Any hold-up along the way can cost a lot of money.
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Maximize profits when flipping real estate
Once a budding home flipper has a grasp on the possible mistakes, they can then move on to focus on ways to maximize potential profits. According to Auction.com, this type of investing can be costly, but there are plenty of methods to end the day with a significant amount of cash.
For starters, flippers can be selective when buying homes. Not every house is right for a flip, and some are better suited to be fixed up and put back on the market quickly. Auction.com explained that these are the houses in good neighborhoods near quality schools. It can also help to pick properties in areas with low crime rates. Plus, the finished product should fit nicely into a desirable price range. While this can mean picking boring, run-of-the-mill houses, they are safest and least risky choices.
Most importantly, home flippers have to be able to plan ahead. Auction.com noted that repair costs are one of the most expensive areas of this process, and underestimating them can be disastrous. So, professionals need to figure out where their money is going, such as into the roof, foundation, kitchen, bathroom or any other part of the house.