Flipping houses can be a path to wealth if you play your cards right, but it can also result in money pits and small returns if you don't know what you're doing. Before you get ready to flip your first house, make sure you're considering all of the following questions.
What’s your limit on purchase price?
- There’s always a cap to any sales price you can get
- A flip will always need at least some work
- This means you need to find an amazing deal to make money
How do you find the best deals?
- Divorce court
- Probate court
- Foreclosed homes
- Look for homes that are sound but need cosmetic work
- No major repairs: plumbing, electrical, foundation
Should you get an home inspection?
- Even if you’re paying cash, it’s a good idea
- Ask the inspector to focus on major issues
- Get a sense for outdated or noncompliant features or systems
What improvements can you tackle personally?
- Hanging drywall
- Installing cabinetry
Who can help you?
- What improvements can’t you handle?
- Look for people to fill the gaps
- Ask about rates and availability
- Pay them on time
- Maintain good relationships
What's your timeframe?
- This will depend on what needs to be done
- Build in time for each task plus wiggle room
- Bad weather
- Missing supplies
Does the market matter?
- Markets with robust price growth tend to yield low returns, but ...
- Try to find markets where homes are moving more or less quickly
What will you do to balance your portfolio?
- Successful flippers diversify their real estate investments
- Will you venture into becoming a buy-and-hold landlord?
- Will you offer lease options to renters?
- This way, a bad flip won’t sink you
Can you think like an investor instead of a homeowner?
- Don’t get carried away with upgrades
- Use materials that are classic and long-lasting
- Offer wide appeal without sacrificing much quality