How To Flip A House Successfully
The Seven Challenges of Flipping a Home
Flipping a home is not for the faint of heart; this endeavor requires a lot of determination and hard work to pull off. Home renovation shows glamorize the process, but flipping a home takes longer than one forty-five minute episode shows. Before you invest in flipping a home, here are the pitfalls to avoid.
• Choosing the Wrong Location
It’s every house flipper’s nightmare: what if I pick a poor location? A lucky few have a nose for real estate trends, but novice house-flippers may have a more difficult time. Picking the right location is tricky unless you’re educated about the local housing market. Every neighbourhood attracts different buyers. Generally, the most profitable neighbourhoods are suburban homes close to resources like grocery stores, restaurants, freeways, and businesses. But even these neighbourhoods can be tricky.
Buyers are interested in paying more for reasonable homes that are updated, but not out of their budget. If you’re willing to take the risk, you may want to invest in an up and coming neighbourhood. You’re more likely to find cheap homes that you can renovate to look much nicer, but you gamble at the cost of what someone will pay. A smart homebuyer will buy if they foresee the development of the neighbourhood. Study up as much as you can on the housing market and real estate strategies to make the best decision.
• Buying too Quickly
Amateur house-flippers often make the mistake of buying too quickly without thinking through the details. Many are afraid that their prize is going to sell too quickly and they jump the gun. But cheap homes don’t always make good investments. Critically analyze the state of the home and the local economy to make sure it’s worth the investment. If you have any doubts you may want to reconsider; better opportunities will come your way.
• House Flipping Financing Can be Hard to Come By
One of the challenges investors face is choosing the right financing option. When it comes to house flipping financing, there’s no one size fits all answer. Investors generally have four financing options: 1. Hard money lending, 2. private money lenders, 3. bank financing, and 4. online mortgage lenders. The best option for newbies is hard money lending and private money lenders because the lender is more concerned about the potential value of the property rather than your experience.
Bank financing is used by experienced house-flippers. This method has the lowest interest but it takes as much as three months to secure. Online mortgage lenders are gaining popularity because they are able to make quick decisions regarding online applications and lend nationwide. If you’re a newcomer, invest in a hard money loan. Research lenders in your area such as hard money loans in San Diego, CA; Atlanta, GA; Cincinnati, OH and more.
• Tight Deadlines
Lenders want their money back, and some lenders have a deadline. Most hard money loans, for example, require you to pay back within the year and have high-interest rates to make sure their investment is secure. These deadlines require you to renovate fast and sell fast.
• Expensive Renovations
Thoroughly inspect a home before purchasing. As mentioned before, the cheapest home is not always the best option. Set your budget and make sure the repairs and renovations you plan to make are realistic. Inspect major amenities like gas, electric and plumbing conditions. Even the most prepared investor may experience unforeseen costs, so find a home inspector to investigate the property to make sure it’s a viable option.
• Fluctuating Housing Market
The market naturally rises and falls in a cycle. That means you can only predict so much about the outlook for real estate in the future. In response, you should educate yourself on housing law. Take real estate courses online and attend seminars that can give you a better grasp of how to analyze the market. A financial advisor can also help you make a wise choice based on your budget.
How to flip a house successfully is not to be taken lightly, but it can pay off big in the end. Be sure to plan for ‘the seven challenges’ ahead and you too can become a successful house-flipper. If you would like to tell us about your own adventures as a successful house flipper or have you got any questions or suggestions for us, please feel free to leave a comment below.
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