House flipping is a huge investment solution today. Since television shows have made this sort of activity popular a while back, almost every person you know has at least thought about flipping houses.
But getting in the industry is difficult, and staying in is even trickier. This is why you want to make sure your first investment of this kind is a successful one. And to help you tackle the process like a pro, we have a step-by-step guide you can follow.
First, what is house flipping?
The house flipping concept is familiar to many people out there, but if you’re not one of them, we have more details. Simply put, house flipping means buying a house, renovating it, and selling it for a profit.
Generally, house flippers search for homes in poor condition that regular buyers can’t be bothered to renovate. Obviously, these properties’ selling point is quite low, leaving room for renovation expenses. Bringing it to a decent condition and ensuring it meets the buyer demand. Now that you have a better understanding of what the process involves, you know if you are ready to get involved in a project of this amplitude.
Do your research
Like all investments, house flipping needs to be backed up by a ton of research. To end up with a hefty amount of money in your pocket, you must carefully analyze the local real estate market and its potential.
Besides, analyzing different markets will allow you to make a much more suitable investment decision for your current buying power.
For instance, if you only have a modest amount of money, let’s say CA$20,000, it would be futile to try to invest in markets where property prices go well above CA$900,000.
In this case, regardless of your financing solutions, it will be nearly impossible to cover that sum. So, before starting your house flipping investment, research the market and decide what range you can afford to invest in. This will help you ensure you have a generous profit margin once you renovate and sell it.
Write a business plan and set a budget
You have to start thinking like an entrepreneur. And so, you need to write a business plan for your investment. You don’t need to write a fancy corporate-sounding business plan.
However, you do want to set a budget, timeline and project outlook. When writing your first business plan as a real estate investor, make sure to include the following.
- How much money you want to invest in your first investment property?
- How much money do you want to hold in reserve?
- How much money do you plan to invest in renovations?
- Do you have enough money to cover your expenses until you get the lending money?
- What type of renovations do you plan to bring to your investment property?
- Are you willing to repair structural issues, too?
Try to answer all these questions and you will have an easier time planning the whole house flipping business. As a general rule, avoid structural fixes. These involve a lot of permits, work and expenses. Instead, try to focus on cosmetic updates. These are easier to handle and don’t involve paperwork at all.
Get the financing before starting to flip homes
One of the most common issues encountered by house flippers is not planning the financing part in advance. You need to find financing before you make an offer and have it approved. This will simplify this type of investments tremendously and it is a piece of advice you must remember for your entire career as an investor.
Be wise when you apply for financing. Some banks have impressive interest rates on this type of loans, which you most definitely want to avoid. Also, make sure that you pay close attention to fees and other similar variables.
Get in touch with contractors and try to bound meaningful collaborations with them. This is one of the easiest ways to ensure all the projects you carry on your flip property will be successfully completed.
Ideally, you should start getting quotes before starting to work on your project. This leaves you enough time to test different contractors and compare their fees.
Find the right property
Learn how to find amazing deals in the targeted area. In short, you should learn how to spot properties under the market value but with huge potential. Try to collaborate with a realtor, at the beginning of your investment journey. Alternatively, you can try to work with property wholesalers or to build a strong mail marketing campaign.
We mentioned how you should only consider aesthetic renovations, and we stick to our suggestion. These are easier to handle and don’t require permits and other paperwork. Learn how to find contractors that work well and work fast, efficiency is one of the key ingredients to a profitable house flip.
Pay attention to elements like kitchen, bathrooms, and flooring. These are some easy and affordable ways to sell a property for a profit.
Clean it spotless
Once you finish renovating your property of choice, search for a Toronto commercial cleaning company that can handle the cleaning part in a timely fashion. With high-performing equipment and professional cleaning products, a similar company will do in a matter of hours what a maid can accomplish in a week. Acting fast is another secret to a successful and profitable home sale.
Plus, cleanliness is one of the easiest ways to market your flip property to potential buyers, so it matters a lot in the large picture.
This is the last and easiest step you must take care of before enjoying the results of a lengthy and tiring process. We say this step is the easiest because it will mainly be handled by your realtor. So, make sure you find one that can help you sell your flip property for a generous profit. Keep in mind that the entire pricing process can be a close collaboration between you and your real estate agent.
This is one of the easiest yet comprehensive guides you can follow to start your investment journey as a real estate professional.