Flipping houses is a popular thing to do right now. Your college buddy does it. The guy you used to work for does it. Seemingly everyone on TV does it. Hell, even Scott Disick does it. The whole thing seems straightforward: Buy up a crusty old house, do some manual labour, and resell it for much more than you paid. But let’s look at what it really takes to make money flipping houses — and how you can get started.
How to choose a property to flip
You’ll find your properties through foreclosures, bank short sales, and property auctions. But buying property is no easy task in and of itself, so treat this part of the process like you would any other home acquisition.
Think of a few things when you’re doing this, too. You might find a dilapidated property with “great bones” or whatever else, but there are factors that will contribute to its resale value that you can’t control. Even if you create the most deluxe, fabulous home, its location will impact its value, for instance. Check on the value of surrounding homes to get an idea of what people usually spend to live in the area. People will spend more for quality, but if they can get that same quality in a better location, you might be out of luck.
If the property you select is near a school, assume prospective buyers might have kids, so don’t skimp on your backyard. If it’s in a commuter suburb and is located near bus stops that take workers to and from another city, consider that it might be better for you to focus on renting it out rather than selling it. Have a general plan for what this home will look like, what sort of person is best suited to reside there, and how you’ll meet the unique needs that come with its location.
Also, don’t half-arse anything here. Follow regulations and make sure your work is quality. Can you sell a house with shoddy wiring and questionable construction? Sure you can, if the inspector doesn’t catch you, but you’ll develop a bad reputation and, worse, might actually get someone hurt.
Prepare for the physical and mental strain of flipping house
You might have a background in carpentry or electrical work, which will come in mighty handy when you’re flipping houses. Conversely, you might have no idea how to hold a hammer and plan to hire someone to do that sort of thing. Just know you’ll end up doing some kind of work on this home, even if it’s small. You’ll be helping with planning, hiring, and maybe even a little manual labour.
This won’t be easy. While you’re dedicating physical and mental energy to this endeavour, the stress over whether or not someone will buy it and make your investment worthwhile will loom over you, too. Be prepared for that.
“The hardest part of flipping homes is the mental stress,” 20-year house-flipping veteran Daniel Gonzalez, CEO of Danny Builds Homes LLC, said. “You have to be mentally built to handle the pressure, deadlines, and the most common unexpected financial setbacks.”
Make peace with the fact that you might not sell the final product for the price you want. Depending on the housing market, you might not sell it all, at least for a while. You have to spend money to make money, but that’s tough to reckon with, especially after you’ve put in all those long hours.
Learn about the real estate business
There’s more to this business than just buying the house and doing some work on it. It won’t hurt you to become intimately familiar with real estate, building management, local laws, and more. Stay curious here. Hell, take a real estate class — there are many available online. Some of them even offer discounts through Groupon. A few hundred dollars dedicated to enhancing your knowledge could pay off big time in the long run, especially if it stops you from making a critical mistake.
“The best advice that I can offer someone starting out is make sure you learn all the in and outs of real estate investing. I have also seen so many individuals make so many mistakes and lose hard-earned money,” said Gonzalez, who teaches a monthly course in New Jersey.
Look on the bright sides
There will be physical toil and mental anguish involved when you try to flip a house, but there are also a few benefits. The first one, obviously, is the potential for a payout.
“I first started working in construction, and my family did, as well,” Gonzales said. “I started a company at a very young age and realised the money was in flipping, not being a contractor, so I switched over and have been doing it ever since.”
That man has been doing this for 20 years, so there must be money in it — if you do it right. Take comfort in the knowledge that this really can yield some cash as long as you know what you’re doing and don’t try to take the easy route.
Beyond money, there’s something else you can look forward to, too: Fulfillment.
Gonzalez said, “My favourite part is the transformation from nothing to a beautiful home and knowing that I built something that a family can enjoy and make new memories there.”