Preparations to Make Before Flipping Your First Home
Although house flipping can be a lucrative venture, it’s important to understand that profitability is far from a guarantee. Even if you invest in a seemingly desirable property in a good area, there are a number of ways the flip can go south. Fortunately, when it comes to flipping homes, careful planning and research can go a long way. So, before undertaking your first flip, make sure to attend to the following preparations.
Gain Some Insight into the Location
If you’re looking to maximize the profitability of your first flip, it helps to gain some insight into its location. Unsurprisingly, homes that are located in areas with high demand for housing tend to be more profitable investments than properties found in an area where demand is on the wane. So, before proceeding to make an offer on a property, take some time to research the location. This entails doing a deep dive into local property values, rent prices, population, growth projects, median income and crime rates. With the proper knowledge at your disposal, you’ll be able to make an informed investment decision and prevent yourself from getting stuck with a lemon.
Get an Idea of How Much You’ll Be Spending on Repairs/Renovations
While some flips require a lot more work than others, you’d be hard-pressed to find a flip that doesn’t need repairs and/or renovations. Depending on the size of the property and the scope of the work, getting your first flip in sellable condition can prove tremendously challenging – not to mention tremendously expensive. As such, it pays to know how much you’ll be spending on repairs/renovations before diving headlong into the flipping process.
So, before committing to purchase a home, enlist the aid of a certified home inspector. This person will go over the property with a fine-toothed comb and make a detailed list of any problems they encounter. Once you’re aware of how much work the property requires, seek out estimates from assorted contractors, as this will provide you with a solid idea of how much the work will ultimately cost. Having this info will help ensure that you’re able to walk away from potential money pits before wasting any time, effort or capital.
Make Sure You Have the Proper Budget in Place
Improper budgeting is among the most common problems faced by first-time flippers. Undertaking a flip for which you lack the proper budget can place a considerable strain on your finances and leave you stuck with a partially-renovated home that no one wants to buy. In the interest of preventing such an outcome, make sure you have the proper budget in place before making an offer on a potential flip.
Additionally, while contractor estimates are often accurate indicators of how much flippers can expect to spend, estimates aren’t always 100% correct, and it’s generally safe to assume that you’ll be spending a little more than you’re quoted. So, when working out your budget, make sure to take this into account. Furthermore, take care to set aside some funds for unforeseen emergencies.
Confirm That Your Contractors Are Licensed and Bonded
When creating your house flipping checklist, hiring contractors who are fully licensed and bonded should be among your top priorities. While giving your business to unlicensed contractors may seem like an effective way to save money, you have a lot more to lose than you have to gain from this. Unlicensed contractors have very little incentive to complete jobs on time and on budget or stick with jobs they find too challenging. Additionally, if an unlicensed contractor is injured while in your employ, the responsibility of covering their medical expenses may fall to you.
So, before doing business with a contractor, confirm that they are fully licensed and bonded. If this information isn’t available on their website, don’t be shy about asking for proof of licensing and bonding before committing to hire them.
If everything you know about flipping houses comes from reality television, you’d be forgiven for thinking that a flip represents a simple undertaking. As any experienced flipper can attest, the average flip requires a considerable amount of knowledge and prep work. So, if you’ll soon be attempting your first flip, it’s in your best interest to do your homework. Tackling the preparations outlined above in advance of your first flip can save you a considerable amount of time and money and help ensure that this venture is a profitable one.