House flipping is a popular type of real estate investment that can turn a serious profit. However, you want to make sure you know what you’re getting into. While the process can be rewarding, buying and selling a fixer-upper comes with its share of challenges.
As with most types of investments, fixer-uppers require planning. Here are some tips on what to do and not do when jumping into your first flip.
1 Only Buy If You’re Ready
Buying a fixer-upper means committing to a long-term project. You want to make sure you have the time, budget, and experience to take on the effort. Fixer-uppers are often the right option for savvy (and handy!) investors. However, they aren’t the only option for investing in real estate.
Other types of investments like wholesale real estate, rental properties, and real estate investment trusts might be better options if you’re getting started. These approaches still require time and effort, but they aren’t necessarily as laborious as a fixer-upper. As a rule, do plenty of research before choosing a real estate investment property.
2 Consider Location
Where you buy is often as important as what you buy. You want to make sure that you’re flipping a house in an area that will be in demand. Buying in an up-and-coming — but not yet too hot — area could be beneficial in price. Selling for more than you bought is always the goal, and the right location can make that happen.
Other factors to think about include school districts, proximity to stores, and the local job market. Consider whether the neighborhood is more mature or full of younger families. Check the property taxes in the areas you’re thinking about. Weighing these factors will help you select a property that fits your goals.
3 Schedule an Inspection
If you go over budget, unforeseen problems may be the culprit. You know that your fixer-upper will have issues. However, a home inspection will uncover specifics so you can better gauge the costs you’re likely to incur. Be sure to schedule the inspection before you make your official offer.
Specific issues, like major structural problems, are often not worth the trouble. If the inspection shows that the renovations could be out of your budget or abilities, it’s a sign to keep looking.
4 Invest in Improvements That Sell
Flipping a house always involves sprucing up the basics. But is it worth adding some additional improvements on top of that? Sometimes. When renovating your fixer-upper, you want to make improvements that boost the property’s value and appeal to buyers.
Some examples of worthy improvements are landscaping, modern bathrooms, energy-efficient windows, and new appliances. Remember that it’s OK if the house still needs a bit of work when you sell it. You want to consider which perks will make lookers most likely to buy.
5 Stick to a Timeline
As with many projects, it isn’t easy to decide when a fixer-upper is done. However, you want to enter the project with a clear deadline in mind. Working on the house for longer than planned will stretch your financial and time budgets.
You can avoid an extended timeline through meticulous planning. Sit down with your contractor and estimate how long each portion of the project will take. Then do your best to check off each renovation on time. Yes, hiccups will happen. But having a general idea of your deadline will keep you on track.
1 Forget to Budget
House-flipping beginners may have trouble with the financial piece of a fixer-upper project. It’s critical to have a budget in place before you buy. Otherwise, you might end up putting more money into the house than you can sell it for.
If you’re not sure how to budget for a flip, ask the pros. Get written quotes for everything. Some costs to consider are materials, labor, permits, and unexpected problems. You also want to factor in the price of a real estate agent and other marketing materials.
2 Try to DIY Everything
Some handy home buyers have the experience necessary for a DIY house flip. However, doing all of the renovations yourself isn’t for everyone. The time required for DIY projects is a cost of its own. And if you make contracting mistakes, you sink your budget and timeline even further.
Remember, specific tasks are best left to the professionals. If you don’t have any home renovation experience, you’ll need to hire contractors, plumbers, and electricians. Investors with some experience can take on specific projects and bring in pros to fill in the gaps. This will help ensure that you’re getting the renovations done right the first time around.
3 Neglect Curb Appeal
Many of your house-flipping efforts will focus on the design and structure of the house. A new roof, clean siding, and energy-efficient windows go a long way. However, when sprucing up the exterior, don’t forget to beautify. Curb appeal sells a home, so it pays to put in the extra effort.
When looking to improve curb appeal, consider planting a colorful garden, investing in hardscaping, and revamping the color scheme. Features like a new mailbox, modern hardware, and outdoor lighting can also make the exterior more appealing. While you don’t need to go broke on landscaping, minor improvements like these will catch a buyer’s eye.
4 Splurge on Unnecessary Features
You want to budget for improvements that sell. However, it’s easy to go overboard. Remember that your fixer-upper isn’t your home. You’re selling it to make a profit. With that in mind, be sure to avoid stretching your budget to add unnecessary features.
Which features are best to skip? Upgrades like custom cabinetry, intelligent appliances, wine cellars, water features, and luxury bathrooms aren’t worth the extra cost. The buyer may want to make changes of their own, so keep your improvements marketable yet relatively basic. Reserve the fancy extras for a home that you’ll be living in.
House flipping can be an exciting real estate venture. But you have to do it right to turn a profit. Whether you’re buying as a flipping novice or real estate maven, it never hurts to consult a team of professionals. Understanding your budget, timeline, and capacity from the start is the key to success. And staying organized from the beginning will help you get there.