Fixing and flipping houses isn’t for everyone, but for those who love it and have a knack for it, it can be an exciting and fulfilling adventure. And while some years are better than others for taking on such a task, 2018 seems ripe for the picking. If you’ve always wanted to get into the game, we can help. Read on for tips on starting a fix and flip business in 2018.
Create a Business Plan
As with any corporate venture, you need to start out with a good business plan. And this is particularly important with flipping houses, as lenders will take you more seriously with a well thought-out plan in place. There are free templates online if you need some guidance in this arena, so don’t think you need to have your MBA to get this task accomplished.
As this fitsmallbusiness.com article notes, a well executed fix and flip business plan will include a goal summary, a lead generation plan, a market analysis, a marketing and sales plan, and business and personal bios. One of the most important facets of a detailed business plan is financial sourcing. Where are you getting the money for your fix and flip ventures? Traditional lenders don’t typically provide capital for new flippers, and you’ll likely need to pursue new methods of financing. Source Capital Funding, now lending in Texas, is one such option. Hard money lenders like this lend based on the equity of the property, which makes it easier for novice real estate entrepreneurs to get in on the game. You might also consider approaching an angel investor; connect with willing (and able!) investors on a site like Angel.co.
Make sure you have a trusted resource with experience in the business check out your business plan before you show it to potential investors.
Identify the Best Properties to Fix and Flip
There is a bit of an art to this, as not all houses up for sale are worthy of this process. First and foremost, it should be in an area that’s convenient for you, as you’ll have to be there often. Ideally, the house will also be located in a neighborhood that’s appealing to others. Potential buyers will be willing to pay for more for good schools, restaurants, shopping, and proximity to parks.
Choose a home without foundation and/or structural issues, as you don’t want to get bogged down taking care of these things. This is particularly true because sometimes these fixes require permits. And when it comes to the “fix”, look for projects that will add value to the home, such as renovated kitchens and bathrooms, opening up large closets, and creating spacious floorplans.
Get Set Up as a Business
You don’t want to run into any legal troubles when getting established, so it’s best to take care of this right away. Meet with an accountant, who will help you decide whether to get set up as a sole proprietor, a business DBA, or an LLC. This will help distinguish your tax filings and limited liability. If someone trips and falls while looking at your property, he or she could sue you. This will help to protect you in that regard.
Check with your state and local municipality to find out what other permits you might need. You also need to get your EIN (employee identification number) to identify your house flipping as a business with the IRS. After this, be sure to set up a business bank account to keep your personal and business money separate and avoid being audited by the IRS.
The last housekeeping tasks are getting some bookkeeping software, business cards, a website, and a business email address. Not only will this help you look more professional to prospects and investors, but your website can house your experience as a sort of portfolio for future endeavors.
Become a Marketing Guru
You’ll likely want to get the help of a real estate agent, particularly if you’re just getting started in this fix and flip business. This person will help you properly price your property by running comparables from the area. Even with this help, though, you still need to be able to market the house you just rehabbed.
Your real estate agent can help you with open houses, but some other things to consider are using real estate websites, bandit signs, flyers, and yellow letters. If you’re in an investment group, make sure to present it to them.
You’ll also need to strike just the right balance when it comes to putting your place on the market. Do it too soon and risk people seeing it while renovations are still being made. Do it too late and you’re losing profits. Figuring out this kind of timeline comes with experience, so you’ll get a knack for it soon enough.
Think you’ve got what it takes to be a fix and flipper? Follow these tips, make a plan, and get out there. Happy House Hunting!