House flipping is once again on the rise, and these real estate investments can be incredibly lucrative as long as you are careful. You must treat flipping just as if it were any other type of business, and that means you need to have a solid plan in place. Here is a quick look at some tips and tricks that will help you become a successful home flipper over the next few years.
Decide Where your Startup Capital is Coming From
The easiest way to finance a relatively small real estate investment is to use your personal savings, but many people aren’t ready to gamble with their own cash. A safer option is to apply for a small business loan through a bank or private lender. This may even include a second mortgage so that you can use it for capital. Potentially even a home equity loan can help you if you need funds from a different source. You would just have to check mortgage rates to see if it is a good option. If you plan on applying for a loan, then you will need to write out a comprehensive business plan. Your business plan should include information such as how much money you need and what you expect to make back.
Find the Right Properties
For your first few flips, you will most likely want to pick homes that are relatively close to where you live. Even if you don’t plan on carrying out a whole-home renovation, you will still need to do at least some work on the property. Spending hours commuting to the home every day is going to eat into your profits. Once you have narrowed your options down to a few neighborhoods, you can then drive around looking for signs or check online for home listings.
Don’t Invest Too Much into Each Home
One of the most common mistakes that new home flippers make is biting off more than they can chew. Even though you probably won’t make as much money off a smaller home, it is going to be much easier to flip. You should look for a single-family home that only needs a handful of cosmetic updates. A factor in choosing which house to flip is the cost of renovation. The easiest way to make money while flipping is to carry out small renovation projects like replacing the floors, adding a fresh layer of paint, and upgrading the appliances.
Consider Working With a Real Estate Agent
You might want to work with a real estate agent if you don’t have experience buying and selling homes. Your real estate agent is going to charge a fee, but they are going to make this process much less stressful. At the very least, a local real estate agent can provide you with a good list of homes within your price range. They can also connect you with other experts like home inspectors, loan officers, and contractors.
In addition to these few tips, you should also consider creating an LLC. You want to be absolutely sure that your personal assets are protected throughout this process, and establishing an LLC is one of the most effective ways to do that.
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