Things to Consider Before Flipping a Property

Flipping properties can be a lot of fun and a great way to make a lump sum of cash in a relatively short amount of time. However, there are many things that you’ll need to consider before going through with attempting to flip a house. It’s best to go in with an open mind and with your eyes open. If you’re interested in getting into flipping houses, take a look at our list of things you should consider before taking the leap into house flipping.

Your Current Job

The first thing you’ll need to consider before you get into the business of house flipping is your current job. Think about whether or not you’re prepared to commit to flipping houses full time, or are you just considering flipping a house as a side hustle?

It’s important to weigh up the pros and cons of both of these options. Flipping a house can be very expensive, so having a continuous income source can help ease the financial strain that comes with this type of commitment – ​​especially if you’ve never attempted a project like this before.

On the other hand, flipping a house can be very time-consuming. You’d have to consider whether or not you’ll have enough time to complete the flip and whether you can handle the project financially if you were to leave your job.

Your Overall Budget

Flipping a property is more expensive than simply buying a new home to live in. With this in mind, you’ll have to budget differently for this type of project. Aside from the cost of the property itself, you’ll also need to consider the cost of additional materials needed for the building. You’ll also need to factor in the costs of labor work if needed, the selling costs, and the holding costs while the house is still in your name.

There are many unexpected things that you may need to factor into your budget, depending on the condition of the property that you purchase. The home may need all new fixtures and fittings, there may be a secret mold, the pipework may need to be updated, or it may even need a complete house rewire. It’s important to budget higher than what you expect to accommodate for any additional costs that may come up in the process.

It’s also important to remember that flipping a house is considered a high risk when it comes to conventional lenders. This means that lenders may decline your mortgage application. If you can’t make a cash purchase for the property, you will need to find another way to finance the purchase of the property.

Learn About The 70% Rule

The 70% rule is an important thing that all house flippers should be aware of. This will help you determine the maximum price that you can pay for the cost of the property so that you can maximise your profits.

Ideally, the maximum purchase price should be no higher than 70% of the after-repair value of the house, minus the costs of renovating the property. Anything above that amount could leave you at risk of only just breaking even, or you may even find that you lose money at the end.

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Consider the Neighborhood

A successful house flip relies a lot on the location of the property. With this in mind, you should consider where the property is and whether or not it is within an up-and-coming market. Do your research, find out how long properties tend to stay on the market in this area, and keep track of which type of properties sell the most.

For example, if you find an area where foreclosure property sales are quite common, this may give you a good opportunity to find a bargain price. However, this is also likely a sign of a declining neighbor.

Additionally, you should check if anything is being built nearby. If there are developments including new shops or a new school, for example, these can become great selling points and can also increase the value of the property. On the other hand, things like an incinerator site or a power plant being built nearby are negatives that will end up decreasing the value of the property and will also make it less appealing to potential buyers.

Think About the Timeline

A very common mistake that many first-time property flippers make is underestimating the amount of time needed to flip a house. This is why it is essential to establish a time frame along with your budget. Both planning aspects are just as important as each other.

On average, it takes around two weeks to get a loan approval. You may also have to wait around 30-60 days from when you make an offer to actually owning the property. Depending on the condition of the home, the renovations and repairs may add on an additional couple of months to the timeline.

During this entire time, you will be accruing carrying costs that directly impact the budget that you’ve set. Some examples include property taxes, loan repayments, insurance, utilities, etc. If you plan properly and have a realistic time frame in mind, this will reduce the risk of any unexpected delays and will also help to reduce the risk of going over your budget.

Think About DIY vs Contractors

It’s important to consider as early as possible how much of the renovation work you can complete yourself as a DIY project and how much of it will need to be completed by external contractors. If you have any skills such as plumbing, carpentry or tiling, it can be extremely beneficial to complete as much of the renovation work yourself as possible. The more you can do yourself, the more you’ll save on your budget.

However, if you don’t have the necessary skills to complete the work well, you’ll need to hire a team of professionals to do the work for you. Keep in mind that shoddy DIY work may not pass an inspector’s assessment, and this may result in the buyer backing out.

The more time the property spends within your possession, the more you will end up paying out of pocket on things such as loan repayments. So if you’re at all doubtful about your ability to complete a professional standard of DIY work, then it may be best just to hire a professional company that can complete the work quickly and to a high standard.

What If The Flip Is Unsuccessful?

If you’re lucky enough, you may find a property for a good price that only needs minimal renovations within a hot market area. If so, it may be possible to complete a house flip within a month. Realistically though, it will usually take around 3-6 months to complete a house flip.

In worst-case scenarios, your property could end up staying on the market for much longer. So it’s a good idea to ask yourself what you plan to do should that be the case. It may be beneficial to rent the property or live in it yourself. Or you may even want to wholesale the property.

Whatever happens, you should always have a backup plan in place just in case the property that you buy and renovate doesn’t flip as well as you’d hoped. If you have any tips on things to consider before flipping a property I’d love you to share them.

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The post Things to Consider Before Flipping a Property appeared first on Wannabe Princess.

The post Things to Consider Before Flipping a Property appeared first on Wannabe Princess.

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