If you’re looking to earn some extra money, buying a fixer-upper can be a profitable choice if you know how to invest your money wisely.
When house flipping, there are many crucial things to consider before you start the sometimes long and arduous process.
Whether it’s your specific real estate market or that the home needs serious upgrades, every house flipping move you make can affect the home’s bottom line and asking price.
What is house flipping?
You purchase a home with a short holding period and the intention to sell it quickly.
While most homeowners buy real estate as a long-term investment, house flipping provides a faster way to make money.
Many investors look for homes that require basic updates and repairs at a low cost. Like most other investments, the idea is to buy low and sell high after the changes are complete.
While house flipping can be lucrative, there are never any guarantees because the real estate market is in constant flux.
Begin by thoroughly researching both the national and local real estate market. Consult with a real estate agent to give you some comparable prices of homes sold in the neighborhood(s) you’re interested in.
It’s also essential to determine what buyers are looking for in location, upgrades, and square footage.
Planning and doing your research will help to ensure you are making a wise investment in a home that should sell quickly.
Always start by budgeting your house flipping plan to avoid paying too much for a home. Set a predetermined limit for how much you are willing to pay, and never go over that when making an offer.
You should also keep the budget for all renovations, repairs and upgrades in mind. Finding a decent home at a reasonable price is the best way to get a great return.
It is vital to hire a home inspector who can help you pinpoint any necessary repairs and issues. A pre-inspection is highly recommended since the inspector’s findings could be the difference between buying the home and moving on to something else.
Once you buy the property, subtract the cost of the home and the cost of all upgrades and repairs. Your final number will be the bottom line, which will show you how much profit you stand to make once the flip is complete and the home sells.
The house flipping 70% rule should serve as a guide. You should not pay more than 70% for the house after the repair value minus all repair costs.
The after repair value refers to the home’s estimated value after all of the repairs and upgrades are complete.
Make sure you understand the ceiling value. This term refers to the maximum asking price for which you can list the home. If you ask too much for the home, it could sit unsold for an extended period of time, resulting in more buyers being hesitant to make an offer.
Source: Inspection Support Network.
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