Turning Hovels into Palaces: How to Become a Successful Home Flipper
So you think you want to become a house flipper.
Doesn’t everyone? It’s no wonder, what with major TV series like “Flip or Flop” and “Flipping Vegas” making the profession look like an easy way to make boatloads of money quickly. Even celebrities have gotten in on the flipping craze, with actor Scott Disick (known for “Keeping up with the Kardashians”) being among the most recent converts to the flipping lifestyle.
While our culture has begun to glamorize flipping, would-be flippers must know that to be successful, the practice has to be treated as more than a “get-rich-quick” scheme.
More Complicated Than You Might Think
Rumors have been flying for a while, suggesting that the average house flippers’ income is around $60,000 per flip. While that’s representative of the potential profit margins involved with a minimum amount of remodeling, the actual average profit per flip is much lower. According to Forbes, depending on how many expenses later drain your profits, you stand to make about 20 to 30 thousand dollars per flip.
As that same article says, however, the earning potential per flip can be more or less depending on the properties you invest in and the steps you take after the fact. It’s more than possible for flippers to make more: it’s just less likely unless they couple their flipping adventures with a stable enterprise.
A More Successful Model
Flipping doesn’t have to be a means unto itself; A more stable way to enter the industry would be to flip properties and then add them to a portfolio of rentals, establishing yourself as a landlord rather than engaging in one-and-done transactions. Many of the self-proclaimed real estate moguls you see on these shows have already done this.
While you have the option to sell flipped properties on the side, earning a steady stream of passive income off of your property is a much more lucrative long-term strategy. Whether you’re looking to become a landlord or sell renovated homes for quick cash, the guide below will give you the information you need to survive in the space.
Obtain Your Real Estate License
Whether you plan to set yourself up as a landlord or not, the first thing you’ll want to do is obtain your real estate license. In addition to allowing you to legally sell and own homes for commercial purposes, having your real estate license will give you the knowledge base you need to renovate your properties within the bounds of the law. You’ll likely have to take hybridized classes to earn your license and pass the relevant exam, depending on which state you’re operating in.
Brokers: Your One-Stop Shop for Real Estate Advice
Moreover, being in good standing with state and federal law also allows you access to an invaluable resource for newcomers to the field: your local real estate broker. Brokers can provide both information and resources to would-be flippers and typically come with a network of agents that you can tap into if needed.
Acquire the Necessary Capital
Unless you happen to have thousands of dollars just sitting around in your bank account, the chances are that you’ll have to borrow capital to get started. Fortunately, if you’re looking to deal in rental properties, there are brokers out there that offer rental property loans that will cover the costs of your first property, allowing you to get started in your real estate career. This is another reason why taking a hybridized approach to the house flipping industry (part working in rentals, part in sales) can benefit would-be flippers: they get access to these kinds of loans.
It can be rough to get your hands on enough capital to make your first investment, and this can be one of the easiest ways to get the assets you need.
Invest in Your First Property
If you ask flippers that have been around for a while, they’ll tell you that whether your flip succeeds or fails depends entirely on your decision to purchase a particular property. Older homes can be full of nasty surprises for would-be flippers, and while there are ways to detect some of them, others can rear their heads mid-renovation and cause serious damage to your bottom line.
While taking a tour of a property you’re interested in, keep an eye out for these common signs of a serious underlying issue.
- Ceiling stains. If you see any of these, take note: even if the leak that caused those stains was eventually fixed, there’s still the possibility that its aftermath left mold, rotted framing, and any number of other issues.
- Doors that won’t close, uneven flooring. While the former can have a benign cause, like the house settling, the latter is usually a sign of a foundation issue, one of the most expensive challenges a flipper can come across. Avoid at all costs.
- Holes in door frames, decks, and other wooden fixtures. Termites are no joke, and even a small infestation can turn large very quickly. Moreover, they aren’t the only critters that tend to hide in these holes: if you discover slightly larger holes on wooden fixtures outside, you could have an infestation of a different sort. Either way, it’s rarely worth dealing with.
Renovate and Put the Home on Market
Once you’ve acquired property, you go about the business of actually renovating it. Several things can go wrong during this process, so don’t be surprised if things don’t go exactly according to plan.
Once you’ve got a finished product that’s ready for habitation, your next step will be to place it on the relevant market. Whether you’re looking to rent or outright sell, you’ll need to create an engaging listing and post it on the relevant sites.
Flipping is often thought of as a way for entrepreneurial individuals to get rich quickly, which is probably why so many of these individuals have failed miserably. When done correctly, house flipping is a great way for people to enter the real estate market or expand their existing portfolio, setting themselves up for long-term success.