House flipping is going to be tougher because the Feds have hiked up the interest rate, rising house prices, and a tight inventory. Besides, the popularity of reality TV shows such as Flip This House, Flip or Flop, or Rehab Addict have encouraged more and more people to jump into this business of buying homes, renovating them, and then selling for a profit. So, competition these days are tougher too than it’s ever been.
What should be your strategies for the New Year either you are an experienced investor or a brand new flipper? The time is perfect for drawing out a business plan and strategy if you want to start flipping right after the winter holidays. Check out the following tips that will help you being ended up bankrupt if you are a noob and to do better if you’re already a flipper:
Create a Business Plan
No business can succeed without a solid business plan. Do you consider the flipping just an extra source of income? Well, even a side project is bound to fail without any direction. So, create a business plan about how many houses you want to flip, your strategies to renovate them, and how much money you are expecting as profits. Such a plan will help you determine your purpose and keep you on track.
Know the Market
The real deal about flipping house business is to be aware of the local market and past trends for the last six months. Take your time and do the homework on recent sales, comps, and the average selling time of particular properties. Such information will help you negotiate better prices, figure out good deals, and get a better estimate of your profit margin.
Know Your Buyers
Every flipper should buy and rehab houses with a particular type of consumers in mind. It means you have to figure out who are going to be your potential buyers and rehab the house with their possible demands and requirements in mind. For example, buying a house next to an elementary school means you have to rehab it by keeping young families with kids in mind.
Stick to a Budget
Budget depends on various factors such as the location and size of the house and how much repairs are needed. Determining a budget and sticking to it will keep you from wasting your money.
You must figure out the ARV or After Repair Value of your targeted property. It’s the estimated amount of the selling price after the house has been rehabbed and repaired. Your total investment, i.e. the buying price and the rehabbing costs, must not cross 70% of its ARV. Going over the number is likely to put you at the risk of losing your profit and sometimes the principal.
If everything is set, you should start looking for houses for flipping as soon as possible. Even if you don’t have plans to launch the business in a couple of months, early searching will help you start off on the right foot when you’re ready to roll out.