Real estate is one of the most popular investments in the world, but when discussing real estate investments, flipping houses often goes overlooked. Believe it or not, nearly a quarter-million homes are flipped in the US every year.
Well, you can benefit from the same type of investment with the right tools, and it’s even easier to start than you may think. Let’s talk about flipping houses and how to get the most out of your investment.
What Does Flipping Houses Mean?
Flipping houses is one of the most popular and lucrative investments in real estate. Essentially, you buy a house or investment property in need of repair, fix it up, and sell it for profit. Let’s try an example.
Let’s say you buy an older house being sold “as-is” for $100,000, and it’s in need of $50,000 worth of repairs. You may be able to avoid realtor fees, closing costs, and a lot of other fees associated with home purchases with a cash offer.
So, you’re $150,000 in and the house is massively improved. You will then try to resell it for $250,000 to $300,000, potentially earning you a $100,000 return on investment or more. However, pulling that off is easier said than done.
How to Flip Houses
If you’re handy, you can save yourself a lot of money by doing repairs yourself. If an inspector quotes you $50,000 worth of repairs, you could easily bring that down to $20,000 by doing the work. However, there are more factors to worry about.
Buy in the Right Market
First, you want to focus on location. If you’re buying a house in need of repairs, you’re taking a pretty serious risk. Limit your risk by purchasing a fixer-upper in a booming market, as this will help improve your resale value.
Trying to sell a home in the wrong market is always a challenge, no matter how much money you spend on renovations. For example, access to public transportation, downtown areas, schools, and landmarks can help improve your resell chances.
Next, always make sure the odds are on your side and, most importantly, prepare for surprises. The most qualified inspector in history may tell you that renovations will cost $50,000, but that could easily turn into $75,000. Always have more prepared than you need, even if you’re taking out a loan, as you can always pay it back later if you need to.
Acquire the Right Funding
However, you will need an initial source of funding to purchase the property and make repairs. If you have a 15% down-payment, you’ll still need the rest to purchase the house and enough for renovations, which could add up to over $100,000 alone.
Instead of applying for a 30-year mortgage for something you plan to resell, you can use lenders like Kiavi for bridge loans designed for property flipping. This way, you can get the money you need for the purchase and pay the loan back in full within 18 months without worrying about additional fees.
Flip Away
Now that you know how to start flipping houses, why wait? The sooner you start, the sooner you can sell a house and potentially double your money.
Find the right property, get the right funding, and stay up to date with our latest financial tips to keep your investments in good health!
Also published on Medium.
