We’ve all seen the shows: Fixer Upper, Flip or Flop, Love it Or List it, the list goes on forever. But what does it really take to flip a house beyond the magic of television? Are you up for the challenge? Just like with everything in real estate, preparation and knowledge are the two most important things you need to make sure you can do a successful flip, but what else does it take? What does it really take to make a profit off of your hard work?

Cash or Loan?

Want to hear something exciting? You don’t need hundreds of thousands of dollars to do your first flip. After all, just like you can purchase your primary residence with a loan, you can often do the same for a secondary property. The biggest issue with this is obviously that you will have increased closing costs as well as a loan to pay off on the property when you go to sell. Secondary residences also come with higher interest rates, and some lenders won’t be able to help if you are planning on immediately selling the property. However, if you do find a situation where getting a loan makes sense, it is often the perfect way to get your feet wet in the home flipping process. After all, needing less cash at the closing table keeps more in your pockets to do the renovations you need to do in order to turn the house around. Just make sure that you consider all aspects of both paying cash and getting a loan to see which makes the most sense for you. 

Set a serious budget.

One of the easiest ways to run into trouble when trying to renovate and resell a property is to not set a budget and stick to it. You’ll be faced by tons of choices as you go through the process: granite or laminate, hard woods or vinyl, new roof or just a patch, home warranty or new AC unit. All of these choices carry a price-tag with them, and you will want to go in with a secure idea of how much you have to spend and what you can expect to sell your house for once you have done the renovations. Other than the cost of any known renovations you know will need to be completed, make sure that you consider the following: real estate commissions you’ll be paying when you go to list, monthly cost of utilities and any loans you have on the property, taxes you will owe (these vary by county and state), and anything particular to your flip that you know will come up. As long as you prepare for these items and leave yourself some buffer room for profit, you’re setting yourself up for the best possible chance at success. 

Put a great team together.

Some home are obvious rentals (think rustic but chique cabins in the wood or river front homes), so if the home has been rented before, it’s always a good idea to ask how that rental history has gone so that you

One of the smartest things you can do when flipping a home is to make sure that you have a great team assembled. After all, unless you want to treat this as your full-time job, you won’t be able to do everything yourself and will need to have people that you trust to help you get to the finish line. Some big players you will need to consider are: 

• Lender: If you are planning to purchase the home with a loan instead of cash, you will want to make sure that you have an awesome lender on your team. What makes a great lender? Primary elements include: good interest rates, quick responsiveness, ability to underwrite quickly or before an offer, and local if possible (so you can go knock on a door if necessary).
• General contractor: Unless you are a contractor yourself, you will need a contractor on your team for any big renovations, especially if you are making an addition to the home since you will have to register those improvements through the county. Even if you don’t need to get the work officially permitted, having a great general contractor on your team will help you get in touch with workers they know and trust in every field. One of the most frustrating parts of a renovation can be getting swindled by bad workers or people who promise more than they deliver, so it is definitely worth paying a little bit more for work that turns out quality. 
• Real estate agent: Having a great real estate agent on your team is absolutely essential when it comes to flipping. Not only will they help you purchase the home, but they will also be your best resource for deciding how much money you should be able to sell it for once it’s fixed up since they can run comps for you and provide you great insight into what the area is doing and what sorts of renovations will get you top dollar. Thinking of FSBO instead? While that’s always a choice you can make, stats show it doesn’t often pay off. Numbers report that sellers lose up to around 26% of their potential sale price by doing so, and when your bottom line is your most important element, you want to make sure that your house not only sells for top dollar but that it sells quickly. 

Don’t make decisions based on emotion.

For new flippers, this can be one of the toughest elements because all of your previous purchases will have been for your primary residence, but what is most important to remember is that you are trying to flip this home to make a profit, not to live in. Your decisions need to be based out of logic, and if you think that you are going to have a hard time with this part, make sure that you have someone on your team who can help keep you on the straight and narrow. When might this come into play? Purchasing the home is the first place, as in a market that is as competitive as our local one currently is, you want to make sure that you don’t get so competitive that you outprice yourself on the initial bid. If you can’t afford to pay top dollar on a home and make your profit goals later, DON’T buy the house. Similarly, as you are doing the renovations, remember to cater to the market, not your personal style. You might love bright green, but if most of the houses you are competing with and pricing your eventual list price of are primarily neutral, don’t let yourself go too crazy. 

It's okay to learn from your mistakes.

Even seasoned flippers don’t always end up making as much as they hope that they will. After all, you are at the whim of the market, and finding fixes you weren’t expecting along the way is just part of the process. As long as you play it smart and follow the steps above to set yourself up for success, however, you’re at least handling it well and putting profit within reach. You certainly won’t make money flipping until you try it, and if you view the first few as a learning process, you’re likely to end up making far more down the line than if you never tried it at all. 

Are you ready to try flipping your first house? Or are you a seasoned flipper and have good advice that we should pass along? Let us know by reaching out to 678-242-9981 or by sending us a message using the messenger icon on our website. We can’t wait to help set you up for success on your next flip!