House Flipping for Beginners | Benefits, Drawbacks, and Tips

House flipping is more popular than ever. Buying a home that needs repair and renovation, and turning it into a profitable investment seems attractive to many people. While house-flipping can be a lucrative investment option, it may not be suitable for people who are looking for a safe-bet investment.

The truth is flipping houses is no different than any other business: It requires knowledge, preparation, and patience. In this article, we’ll explain what house flipping is and what you should know before taking the plunge.

What Is House Flipping

House flipping is the practice of acquiring distressed properties, with the motivation of renovating them and reselling them for a profit. With house flipping, you’re buying a property as a real estate investment rather than a place to live.

In general, the concept means extensive repairs or improvements by yourself, the temporary owner. The main idea of house flipping is buying low and selling high. You invest your money with the motivation of earning profit in a short time, which is usually months or sometimes a year.

How Does House Flipping Work

The house flipping process starts with finding distressed properties. You can spot them through foreclosures, bank short sales, or property auctions.

Having a strategy and spending your money wisely are two essential keys to a successful house flipping process. Choosing an undervalued property is important too.

Later, you’ll need to invest in renovations that will increase the property’s resale value and attract possible buyers.

Advantages and Disadvantages of House Flipping

House flipping indeed brings significant profit, but there are obvious risks along with rewards. Before you get started, you’ll need to be aware of some of the benefits and drawbacks.

Benefits

Making a Good Profit

The primary and the most obvious motivation for house flipping is to profit. If done in the right way, you’ll not only generate big returns on your investment, but also you’ll achieve in a short time.

Working Part-Time

One advantage of house flipping is that you can do it as a side job, as it doesn’t require your full-time attention. This way you’ll make extra money. Plus, you’ll have the chance to see if house flipping is right for you before you fully commit yourself.

No Need for an Office

You won’t need to rent an expensive office or warehouse to do your business while you’re initially getting started because you’ll most likely be the only employee. From the comfort of your own home, you can run your own house-flipping business.

Path to Personal Growth

House flipping is a great opportunity to learn and gain experience. When you’re flipping houses you’ll learn how to manage a business. You’ll also learn the essentials of the real estate business which is a huge benefit.

Building Network

One of the most important aspects of real estate is networking, which can help you locate excellent off-the-market opportunities that no other investor has. When you’re flipping houses, you’ll make new contacts from the industry and these contacts may be useful in your future real estate investments.

Drawbacks to Flipping Homes

Emotional and Financial Stress

One thing you should be prepared for is stress. House flipping comes with both emotional and financial stress: While missed deadlines burden you emotionally, increasing costs will stress you financially, especially if you’ve borrowed outside funding.

Legal Problems

While you’re flipping houses, one issue you might face is a house without a clear title. If not addressed and fixed properly, you might face a lawsuit. This is why make sure you have a competent legal advisor next to you during the process.

Unexpected Issues

Another downside of the house flipping business is the unexpected costs. You may like a house a lot and put a lot of money only later to find out that you’ve not checked the roof or the garden properly.

How To Start House Flipping

Proper Neighborhood Search

Note that returns aren’t always guaranteed with house flipping. If you buy a good property in a bad neighborhood, no amount of restoration will entice buyers. This is why spending some time to find the right location should be your first step when you’re starting your house flipping journey. Getting assistance from a real estate agent might help.

Before you commit your funds and invest in a property, it’ll be useful to get a house survey done. You can work with a reliable contractor who will assess the house and will help you understand the estimated costs.

The Rule of “70 Percent”

Real estate investors use the 70 percent rule to see how much they should pay for a house. According to this rule, the ideal is to pay only 70 percent of the after-repair value (ARV) of a house, minus the repairs.

For example, if a property’s after repair value is approximately $300,000, the maximum you should be paying should be $210,000. If you think the renovation will cost $50,000, don’t pay for more than $160,000.

Still, note that this rule doesn’t guarantee a profit, but lets you spare a budget for unexpected expenses.

Team of Experts

As a house flipper, certain skill sets will help you succeed. Construction, real estate, and design knowledge, for example, are useful abilities to have. Even if you don’t have those skills, you’ll need to know where to go when you need help.

Before you start flipping houses, make sure you have a good network of lenders, real estate and insurance agents, and contractors who can assist you to find, fix, and sell a home.

Finances

The following step is to determine how you’ll fund your project. You’ll need to get preapproved for a loan if you don’t have any cash on hand to spend toward the property. To do so, you’ll need a good credit score. Plus, the bank may require a down payment.

Financing a home is not just the initial cost of buying the home and repairing it. You’ll also need to consider property taxes, insurance payments, marketing expenses, real estate agent fees, etc.

Final Thoughts

As we’ve tried to explain there’s a lot to learn if you’re new to flipping houses. Purchasing and flipping properties isn’t as simple as it might sound. But you may be successful at flipping homes if you take the time to understand how to do it correctly.

Get in Touch

    Related Articles

    Find the best article opportunities find the best article opportunities

    Healthcare in Turkey

    Healthcare in Turkey Turkey has become a leading country in terms of healthcare in its area over the past few decades. The country doesn’t only provide healthcare services to its [...]

    How To Get a Mortgage in Portugal

    How To Get a Mortgage in Portugal When coming from abroad and attempting to settle into a new home through arranging a mortgage, there is much to know beforehand. This [...]

    Cost of Living in Greece

    Cost of Living in Greece We would not be exaggerating if we say that Greece is the cradle of civilization. It is the place the Western culture and civilization were [...]

    Your Guide to Investment in Izmir Real Estate

    Your Guide to Investment in Izmir Real Estate At Get Properties, we’ve helped countless investors from various nationalities to acquire property all around the globe. Now, it’s time for us [...]

    Buying Property in Ankara: The Ultimate Guide

    Buying Property in Ankara: The Ultimate Guide At Get Properties, we’ve assisted countless investors from all over the world to purchase real estate abroad.  Contact us to get assistance from [...]

    Best Places to Invest in Real Estate

    Best Places to Invest in Real Estate As the world's population continues to grow and economies flourish, the real estate industry is becoming increasingly lucrative. The right investment in real [...]

    How To Prepare for a Move: 18 House Moving Tips

    How To Prepare for a Move: 18 House Moving Tips Moving to a new home is exciting. It’s a fresh start, a door to new chances, and the opportunity to [...]

    Cost of Living in Portugal

    A Guide on the Cost of Living in Portugal There are a few things that need to be considered carefully while planning to move to a new country. Maybe the [...]

    Public Transportation in Portugal

    Portugal Transportation: Your Guide to Portugal Public Transport Portugal has excellent public transportation, especially if you're traveling to a major city or town. It can be a little more difficult [...]

    Buying Property in Istanbul

    Buying Property in Istanbul: The Ultimate Guide Get Properties has assisted many investors from all over the world in acquiring their dream homes and making profitable real estate investments. If [...]

    Let us accompany your overseas
    property investment process