When done right, house flipping can be a highly profitable business. House flipping refers to the process of buying smaller, run-down properties and renovating them to be resold at a higher price.
However, being a successful house flipper means more than buying, renovating, and reselling a property. In the blog, we’ll discuss some of the less known but essential details of the house flipping process. Here is what you need to know before you start flipping houses.
You’ll Need a Fixing and Flipping Loan
Regardless of whether you’re a seasoned house flipper or this is your first fix and flip, there are plenty of financial barriers that make house flipping a complicated endeavor. One of the most significant financial issues that people run into is their mortgage loans.
When you buy a property to make a short-term investment, it’s essential to work with fix and flip lenders rather than traditional loan lenders. Standard mortgage loans were created for long-term investments, which means they don’t fit the bill of short-term flips. Working with a fix and flip loan will make your property financing much more seamless.
The 70 Percent Rule
Flipping houses can be profitable. However, it’s crucial to make sure you’re not putting more into a home renovation than you’re receiving back on your resale. The most commonly used model Real Estate Agents use to plan their budget is the 70 percent rule. This rule states that a homeowner should pay a maximum of 70 percent of a property’s after-repair value.
When you follow this budget model, you’ll increase the value of your property and receive a high return on your investment.
Your Skillset Matters
If you don’t have a passion or skillset for construction or interior decoration, then house flipping won’t be a good match for your interests. House flippers are often successful because of their resourcefulness and ability to complete most construction and decoration projects independently. However, that’s not to say that house flippers must work alone.
In fact, we recommend working with a team of real estate agents, lenders, and other construction and decorating talent to help flip your ordinary property into a profitable home.
Investing in properties to fix and flip can be an incredibly fruitful source of revenue. However, plenty of details in this industry could cause you to lose money faster than earning profits. Review our guide on what to know before you start flipping houses so you start this career knowledgeably and confidently.