The year 2019 saw an all-time high for home flipping in America with over 245,000 flips. The basic premise in home flipping is investing in a property that you then renovate and modernize after which you sell it at a profit.
It’s one of those things that’s easier said than done, but many people make a good living or respectable side hustle out of flipping houses.
Are you wondering how to flip a house? Take a look at our comprehensive guide for making a house flip work.
Work on Your Credit Score
How to finance a house? You’ll need a good credit score of at least 620. If you have any defaults or lots of hits on your credit, work on bringing up your credit score before applying for a loan.
Lenders require 20% down on investment properties and reserves to pay six months of mortgage payments in case of loss of income.
If you haven’t worked the same job for the last two years, getting an investment loan is hard, so stay with that job!
Do Your Research
Do plenty of research on the neighborhood in which you’re buying. Do a deep dive into everything about the neighborhood, including schools, shopping, and walkability. Look at all the comparable homes in the area and learn them inside and out.
You don’t want to put everything you have into a house only to realize you didn’t understand the neighborhood. Investigate neighborhood dynamics such as crime statistics and transportation alternatives.
Are there any plans for the city that could affect the property in question? Don’t assume that once you’ve fixed the home, you’ll sell it easily. If the neighborhood has known problems, it might not sell well even after renovations.
Put Money in Reserves
While you’re doing your research, be sure you’re saving lots of money. You’re going to need quite a bit for your first flip. Some of the expenses include:
- Appraiser fees
- Inspection fees
- Title search fees
- Closing costs
- Property taxes
- Insurance costs
- Utility bills
There may also be homeowners association fees, accounting fees, and more.
Remember to leave room in the budget for the outside of the home as well as landscaping. Curb appeal is important when selling real estate. When doing the landscape, here are some great house flipping tips.
Find the Deals
If you buy at the top of the market, there’s no room in the budget for renovations and making a profit. You’re looking for homes that are run down and selling below value, but avoid homes that are so far gone they need a total rebuild.
How much will you get for the home after the renovations? This is the ARV. You’ll need enough to cover all your investment costs plus some profit.
How to Flip a House
Now you know how to flip a house! It’s not for the faint of heart but done right, it’s a great way to make money.
Build up your credit score and your savings. Research potential neighborhoods thoroughly and go out and find those diamonds in the rough!
Understand all the costs and leave yourself a buffer for some cost overruns.
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