June 1, 2022

When you see houses
flipping on the TV, it looks like an attractive premise. As the name suggests,
the idea is to purchase a home, perform some improvements and repairs, and then
sell it on for a profit. For some, they’re even able to leave their work and flip
properties full-time. However, house flipping is harder than it looks, so here’s some advice.

Step 1: Choose a Property

Remember, profit will
only come if the selling price is larger than the purchase price plus anything
you spend on refurbishment. With this in mind, half the battle is choosing a
property that has potential. Often, this comes down to three things:

  • The area
  • The property
  • The situation
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Since you’ll want to
sell relatively quickly, pay attention to locations where the market is fast
and active (the last thing you want is to have the property on the market for
months and months). With the property, make sure it’s something that will
generate enough interest in the location you’ve chosen. With a three-bed semi,
for example, this appeals to all types of buyers, and would also appeal to
investors looking for Canberra home renovations to flip for profit.

Finally, a great
situation will generally present itself; don’t buy a house in perfect condition
because you have nowhere to go from here. Therefore, the property should need a
bit of love and care.

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Step 2: Arrange Financing

Of course, another major
step for buying and flipping a home for profit is arranging the finances.
Generally speaking, you shouldn’t use a mortgage because these are designed for
long-term agreements. Especially if you plan to flip several properties, you
won’t keep getting away with repaying mortgages early without a penalty.

If you have cash, this
is the obvious solution because it’s quick, easy, and doesn’t involve any loans
or banks. Alternatively, another solution is called ‘bridging.’ Essentially,
this is where you borrow a percentage of the purchase price and fund the rest
through cash. As a short-term mortgage, the lender is clear on the terms and
won’t charge an early payment penalty.

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When sorting the
financial side of the flip, don’t forget all the fees and costs involved in
this process. For instance, this includes:

  • Stamp duty
  • Financing costs
  • Refurb costs
  • Holding costs

Step 3: Refurbish

With a property chosen
and financing arranged, it’s then time to refurbish. For beginners, there are
two ways to achieve the same goal:

  • Hire various individual contractors and become
    the project manager
  • Hire a project manager who will then sub-contract

While managing the
project yourself is cheaper because you have full control of all costs, the
obvious downside is that you need expertise and lots of your own time.
Ultimately, the route you choose will depend on your timeline, budget, the work
that needs doing, and your own plans.

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Step 4: Sell

Finally, with the home
in a stronger position, the house should go back on the market. It’s essential
to work with the right real
estate agent at this
stage because they will provide advice on staging, paperwork, pricing, and the
process itself. If this is your first time flipping a property, working with an
agent is perhaps even more critical. As time goes on and you become more
knowledgeable in this field, then maybe you can forgo the agent and use your
experience instead.

With this, you have the four steps to buying and flipping a home for profit. Remember, don’t invest if there’s not enough room for a profit after purchasing and refurbishing. If all works well, you can walk away with a healthy sum!

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