If you have a knack for fixing things, you can turn that interest into a profitable business. Real estate is a massive business opportunity if you have the know-how. Investing in real estate can lead to a considerable gain in your capital. However, the path to that point is long and requires you to study a lot.
One way to earn in real estate is buy-and-hold. It means you buy a house and hold on to it until the property value goes up. You can rent it out and gain regular income while waiting for your long-term plans to be fulfilled.
There is also a way to invest in real estate without acquiring a property. You can do this through real estate investment trusts (REITs). For this, you buy stocks from a company that holds multiple real estate properties. Often, these properties are shopping malls, resorts, and apartments. REITs are available on stock exchange platforms.
And then, there is house flipping. It is a more tedious yet rewarding way of making money through real estate.
What Is House Flipping?
What you do with house flipping is buy a house or a property that is not in top shape anymore. Simply put, you will fix any rundown property and then sell it at a higher price. In this business, the time from the purchase to the selling of the property is usually short. It ranges from months to one whole year.
You have just read a straightforward explanation of how house flipping works. But in reality, the work is tedious. Unfortunately, it can also be a hit or miss. But of course, just like anything else, you can earn a considerably huge profit over a short period if you do things right. Proceed with caution into this business because it is quite risky.
How Do You Get Started with House Flipping?
House flipping is a straightforward process. You buy a property that won’t sell in otherwise normal conditions, remodel or renovate it, and then sell it later on for a higher price. But what else do you need to get started?
1. Set a Budget
Some would recommend not taking out a loan for a house flipping project. One reason is that if you use cash, you don’t pay interest fees. Suppose you take out a loan and something went wrong with the construction that resulted in the repair extension for another two months. In this case, you are paying two more months of interest.
To do this business using cold cash is already risky as it is. To add debt to the formula can cause disaster. Another risk of using loaned money is that you might be forced to sell the property in a rush. Using your own money, you can afford to wait it out until the price goes up. With loaned money, you don’t want to be in debt for another two months so you sell it as soon as possible.
2. Research the Market
You will have to know if it is ideal to buy a property to flip in a neighborhood. There is no point in renovating a house that no one would be interested in once you finish it. Ask for help from experts. Let real estate agents point you in the direction of good neighborhoods and investments.
3. Build a Team
You have to assess your skills first. If you are good at design and have experience in construction, that’s good news for you. If not, you can always go to the experts.
You will also be needing a team to work with you. Having competent people to help you with the projects is a significant investment if you plan to do this for a long time.
Once you find your first ever property to flip, have it assessed by a professional contractor. This will give you an idea of how much work you need to complete to restore the property.
A significant renovation will also require you to enlist the help of engineering and building commissioning services. They can work with you to ensure that the systems in the house, such as electrical, plumbing, and mechanical systems, will be worth your money in the long run.
Before the whole project starts, you should have a set budget for the flipping. That includes the fees for the professional services, the salary of the laborers, and the cost of materials. The renovation can quickly get out of hand if you don’t stick to the plan. Be prepared to be spending on expenses you were not able to account for during the planning stage. Once you finally finish the renovation project, put it out on the market. It is ideal to sell the house as soon as possible. That way, you can start working on your next house flipping project sooner.
Like many investments and endeavors, house flipping will take some considerable effort and capital on your end. You’ll need to budget wisely, find the right neighborhood, and find the right pros if you want this to be a viable income stream. But all that effort is worth it when you eventually sell your project to a family looking for a home.