Flipping houses, when done correctly, can allow investors to earn substantial profits. If you’re thinking about buying a house that needs serious repairs, fixing it up and then selling it for a profit, you need to do your research, be prepared for the costs and look at things from a business perspective.
Choose the Right House
To make money flipping a house, you need to buy a fixer upper at a price well below market rate and then renovate it and sell it for a profit. To know if a property is a worthwhile investment, you need someone who understands the local real estate market—an agent who will research the asking and selling prices of comparable houses in the area and get an idea of how much money you could reasonably expect to get for a house after you have fixed it up.
Make Sure You Can Afford It
If you want to obtain a mortgage on a property you’re not planning to live in, your lender will probably not be willing to loan you the full amount you need to buy it. If the house is in very bad shape or you plan to renovate it and sell it quickly, you might not be able to get a mortgage at all.
Before you buy a house to flip, have it inspected so you know about all of the problems you’ll need to fix up front. Flipping a house will be expensive in any case, but you want to avoid surprises that could make you go over budget. Talk to local contractors and get estimates for the repairs the house would need so you can make an informed decision about whether you should buy it. Make sure you have enough cash to pay for all the necessary repairs out of pocket.
What If You Can’t Sell the House?
You need to be prepared for the possibility that you might put a ton of money and work into a house and then have a hard time selling it. If that happens, you’ll want to be able to rent it out in the meantime. When you’re looking for a house to flip, ask yourself if you could rent it out for a year or longer and receive enough income to cover what you put into it and still make a profit.
Think It Over Carefully
Flipping a house can be a smart investment, but you need to be careful. In order for it to work, you need to buy a house at a low price, have enough money for repairs and be able to sell it at a profit in the local market. If things don’t go according to plan, you need to be able to rent it out for a period of time and still make money. Arm yourself with as much information as possible and take a long, hard look at the numbers to decide if flipping a particular house is a good idea.
