Have you ever seen those reality TV shows about flipping houses and thought to yourself about investing in something like that? I mean, what’s so difficult about it; right? The problem with these reality TV shows is the lack of practical information. These shows make Flipping houses for a profit look so easy that anyone can do it.
However, the reality is completely different. You need to work systematically and think logically to benefit from it. In this blog post, we are going to answer the typical newbie question “how to buy and sell houses for profit” and give you a practical step-by-step blueprint to follow. But before we do that, let’s define what exactly House Flipping means.
What Does House Flipping Mean?
Flipping Houses is when real estate investors buy old houses for cheap at auctions, rehabilitate them and sell them again within a few months for a profit. Can you make massive profits? Sure but like every other business, house flipping is risky as well. You can buy and sell houses for profits and make good money but with one wrong decision you can lose everything as well.
Step 1: Be Committed and Educate Yourself
Honestly speaking no one is going to spoon feed you how to buy and sell houses for profit. You have to be committed to house flipping and consider it as a business instead of as a hobby, and you must know that it can affect your finances. Moreover, you are the only person who can educate yourself about house flipping.
Step 2: Budgeting
Now that you have learned enough, it’s time to get practical. Honestly speaking you need plenty of cash to buy and sell houses for profit, and you will have to arrange that money yourself. Don’t rely on loan schemes. You might get a loan for your home but getting a loan for investment property is difficult because of a high-risk factor associated with them.
Create an investment budget according to your financial situation and create a written plan. If you cannot afford to invest alone, try partnering up with people but be careful about choosing them.
Step 3: Buying
The third step in our step-by-step blueprint on how to buy and sell houses for profit is buying your first investment property. There are plenty of factors to look for in a potential investment property i.e. Location, neighborhood, initial price, estimated profits and condition of the house.
Location: Although finding a home in a great location is a challenging task, location is the primary factor that decides either you are going to make a profit or not. Start researching on the internet, newspapers and visit some good areas in the city until you find a low priced property in a safe area.
Neighborhood: Remember, people are going to buy this house from you to live there. The best client you can get is a family with kids. Hence it’s necessary that it is in a neighborhood with good people and fantastic schools.
Initial Price and Estimated profits: Learning a bit of simple math would help you in the real estate business. Always negotiate to get the best prices and estimate the benefit. Even though you are not going to make as much as you estimate, you will probably lie in the threshold.
Condition: Yes, you are buying an old house that needs rehabilitation, but it doesn’t mean you have to buy ruins. Try to find a house that you can sell with minimal renovations. The money you save during renovation is the money that increases your profits.
Step 4: Renovation
One of the biggest mistakes that newbie investors make when they buy and sell houses for profit is working on restoration themselves instead of hiring contractors. Even though you think you can do all the work, remember, it will take you two times longer than it will take professional contractors.
However, it doesn’t mean you have to rely on your contractor entirely. You will still need to decide the most visible and significant renovations the house needs and leave the rest for the future owner. One such noticeable improvement is the exterior of the house because the first impression is the last impression.
Step 5: Selling
The final step in our guide on how to buy and sell homes for profit might look easier but is the most difficult one. It is, where, either you earn huge cash or lose everything. However, if you have a good house in a great area; you can make big bucks. How?
Check out your budget books to see how much have you invested in the property. Calculate everything, initial cost, renovation cost, holding cost, loan taxes, etc. Once figured, try to project a 20-30% profit and sell your property accordingly.
Selling your newly renovated investment property to make profit entirely depends on your people skills. As a real estate business man, you will have to be social. However, during this last step, you will need to socialize and negotiate the price with potential clients to earn bucks and maintain your credibility for future deals. Or easily outsource this to an agent or sales person.