Flipping
A lot of people have questions about flipping houses. Do I recommend it? Definitely not. Is it a good source of revenue if you know what you are doing? possibly, but it is risky!
I have recently completed my 19th successful flip over the last 3 years. Over this time I have learnt alot about flipping, and each project I like to think I get a little bit better. The one question that everyone asks is “how do you do it in a down economy?” My answer is – it actually makes it easier! Not only can I find some better prices, but it also less risky because the market is not flucuating at all – thus the property’s value will flucuate less, so there is less uncertainty as to what the property will be worth once renovated.
Over time I plan to post more information about flipping, but for now, here are what I feel the most important suggestions one must follow in order to be successful at flipping:
1) Always look for the worst house in the nicest neighborhood. Location is one of the most important rules of flipping, and therefore if you can find a house worth 200,000 in a nice community where the average is 250,000 you are already ahead of the game.
2) Have loads of money – No matter how well you budget, there is ALWAYS going to be unexpected costs. The worst thing you can do is cheap out on the end of the project because you are out of money. Buyers will notice this. It is a good idea to set aside an extra 20% for unexpected costs.
3) Set finished price before you finish! This is a tough one- but before I ever buy a project I calculate what I will list it for when it is finished so I know what my profit margin will be. It is very easy after a lot of long hours and days to start to value the house more than it is worth, and thus price it higher than the market says it should be.
4) Have a back up plan – Although stable right now, housing markets are completely unpredictable. That is why I always have a back up plan with renting. If for some reason I cant get enough value out of the house that I hoped for, I always know that I can rent it out and make enough to at least cover the carrying costs so I am not losing money.
5) Leave personal taste out of it – The biggest mistake you can make, is to start renovating to your own style and taste. Not only will you start spending more money (because you will undoubtedly start picking better quality and more expensive products) but you will also start eliminating potential buyers with your own tastes in mind rather than theirs. Always try to appeal to as many buyers as possible.
6) Be dedicated! This may sound easy, but over the course of a long project, it can become very stressful and demanding to the point you may not want to be around it anymore. If this is the case, go back to the drawing board, revise your plan and get back to it – because the sooner you get it finished, the sooner you make money!
There you have it. Flipping can be a very risky business, and I dont recommend getting into without having spoken to someone first who has experience in the area. Theres alot you can learn from speaking with someone who has been through the ups and downs of flipping!
