Flipping a house takes planning, money, skill, and time. Even if you think you’ll be able to make a tidy profit in a short period of time, the process can take longer than you’d hoped. There are a few mistakes that you can make when flipping a house that could end up putting you in the poor house.
First, you should set aside capital before starting your new business. It is not easy to turn a home into a profitable business. Before you start, it is important to have your finances in order. It is important to have a realistic goal for the property’s price and the timeframe in which you plan to complete renovations.
A second factor is to have an accurate estimate of the costs of renovations or repairs. Your gross profit does NOT include the costs of renovating or repairing the property. You must be able to pay for these expenses out of your profits, and you should sell the house quickly. These are important steps that real estate agents can assist you with.
You should not only have the skills to fix your house but also have friends who can assist you. You should always ask for references from contractors you hire. A reliable contractor will be able tell you what is needed and how much it will cost. It’s not what you want to find out after you have bought your house.
You have two options when buying a house to flip. You can either pay cash or take out a mortgage. A 10-year or fifteen-year mortgage is better, but it’s important to remember that you won’t be living in the home for that long. A hard money loan is a short-term loan that is secured by real property. These loans are more popular with house flippers because they have lower interest rates than conventional mortgages.
Lastly, you should hire contractors and suppliers who are experienced in house flipping, and always get a home inspection from a home inspector. While you’ll probably need to hire subcontractors for some work, having a team of experts who are experts in the field will ensure that you don’t run into any unexpected problems. You can also hire an accountant to handle your taxes if necessary.
Before flipping a house, it’s important to establish a budget. The 70 percent rule is the most popular. It states that a property should be purchased for 70% of its ARV less any costs of repairs. This rule allows you to account for unexpected repairs, home insurance and utilities, and property taxes.
Once you have established a budget, it is time to start looking for houses that fit your needs. Depending on the condition of the property, some homes require extensive renovations before they are sellable. Others require minor repairs.
About Jim Vanderberg, Toronto Canada
Jim Vanderberg is a real estate investor based in Toronto Canada. He spends his time on the tennis court during the day, and afternoons are spent watching his crypto investments and looking for the next property to invest in. He occasionally flips houses in the Toronto area, but also invests in properties for the rental income. You can follow him on Twitter @vanderbergjim