Have you considered flipping a house? Many people are looking towards alternative investment strategies with real estate being at the top of the list. However, there are many things you probably haven’t considered.
Let’s take a look at X of the top things to know before diving into your first real estate investment.
1. Have an understanding of the business side
Flipping houses is a business. Entering into the world of real estate turns you into an entrepreneur which means you’re going to need to learn the business side of things. You need to analyze your risk and return and learn about the housing market.
Lest you forget about zoning laws and other tax laws. Before heading to your local bank and applying for a loan on a foreclosed house, do your due diligence. Talk to others who’ve paved the way before you and do as much research as possible.
2. Consider Your Budget
Becoming a real estate investor means you’ll have disposable income readily available. Regardless if you’ve taken out a loan or are paying cash in full, there are repairs and renovations that’ll be a part of your budget. Things like hiring a professional contractor to manage roof repairs and replacements or the cost of upgrading appliances and countertops will take an initial investment.
Once you know what you’re capable of spending, you’ll need to start considering the costs you can expect from the home. Don’t forget to leave a part of your budget for unexpected expenses. No matter what house you buy, you’ll absolutely encounter issues you didn’t initially know about.
That’s where your extra money cushion comes into play. If you don’t have that, you’ll have to cut back on repairs and renovations in other areas of the house to compensate.
3. It’s Not as Quick as It Seems
Diving into the house flipping business requires time. It might take months for you to find the right property and even longer to do all of the repairs and renovations. If you’ve already set yourself up with a schedule, extend it. Anticipate the unexpected to change that time frame.
After the house is completely renovated and ready to be put on the market, you still have to go through the selling process. Yes, the housing market is great for sellers right now due to the high demand and low supply. That doesn’t necessarily mean you’ll turn your house around in a few days.
It could take several months and then a few extra months for closing to officially happen. It could be well upwards of a year before you see the money in your hand.
4. Get Proper Certifications
Every home will need to be inspected prior to selling. This goes for when you’re in the buying process as well. Check to see if the house has proper certifications such as structural integrity and generalized home safety.
These will make sure your investment in a property isn’t going to bring on more work than you bargained for. Having these certifications once you eventually flip it will allow you to sell your house quickly.
5. Understand Your Neighborhood
Every neighborhood is different. The people who live within the city have a particular style and way of living. It’s important that before you begin your renovation process, you consider the elements your buyer will want.
The kitchen layout, how you design the outdoors, and even color choices for the walls will make all the difference in whether or not they decide to buy.
If you’re in the countryside, a rustic appeal might be a better suit whereas if you’re in a larger city, you may want something more modern. Desert areas prefer Spanish-style roofs over a New England cottage two-story house.
Summary
Flipping a house for the first time might sound like a lot of fun and a quick way to make money. There’s much more that goes into it than what you see on HGTV. Talk to a professional before taking the plunge. You’ll be thankful you took the extra time to learn as much as you can before making mistakes that cost you time and money.
