Home flipping is an excellent way for beginners to get into the world of real estate investing. For starters, you get firsthand experience doing everything from acquiring a loan, performing renovations, marketing, and selling a property. All of these are useful skills which transfer to other types of real estate investing too. There’s even the opportunity to make great returns, although that is not guaranteed. You will need to make the effort to learn the flipping process if you want to maximize your profits on any flip. In this post, we cover some beginner tips so you can be a better-informed investor and more likely to succeed with your next real estate venture.
Tip #1: Make sure the home is in a great location
Nobody wants to live in a bad neighborhood, and it can really affect your ability to sell the property even after renovations are performed. Ideally, you want to purchase a lower-cost home in a great neighborhood, so that it has room to grow and match the values of surrounding homes.
Tip #2: Always inspect the property before buying
Most flips will be in need of a few touch-ups, but you still need to get the property inspected to discover any structural damage or major issues. Not only will these repairs take a long time, but they can also completely eliminate your profit margins. Most properties that are in need of this level of rehabilitation are not worth your time.
Tip #3: Leave a buffer in your budget estimates
If you’re new to home flipping, you may not know exactly how much certain renovations and repairs will cost. It can be a good idea to leave a small buffer in your estimates for this reason. Also, there are likely to be unexpected costs that pop up throughout the renovation process, and having that buffer can be incredibly useful for dealing with those situations.
Tip #4: Focus your attention on renovations that make a difference
When performing renovations, you want to focus on quick and simple fixes with a big impact. Things like new paint for the walls and new lighting fixtures are perfect examples. You also want to try and keep renovations to high-traffic areas like the kitchen, bathrooms, and living areas.
Tip #5: Sweat equity will make the difference
If you’re handy and can perform some simple renovations yourself, then you absolutely should. The returns made from the work you put in personally are referred to as sweat equity. You can save a great deal on renovation costs, and this is where the real returns lie on a home flip.
Tip #6: Utilize professional services
While you should definitely perform as many renovations as possible yourself, you also shouldn’t be afraid to hire professionals for more complex tasks. Skills like plumbing, HVAC, and electrical wiring aren’t known by everyone, and if you aren’t experienced you run the risk of making a costly mistake. Not to mention, any intricate work will most likely take longer to complete on your own.
An experienced real estate agent will be essential when you are trying to sell the property. They will be able to ensure you receive a good offer on your property so that all the hard work you’ve put into it doesn’t go to waste. They can also help you sell your property quickly, which will minimize your holding costs.
Tip #7: Remember that time is money
Speaking of holding costs, it’s important to remember that you want to flip the property as quickly as possible. The longer you hold onto it, the more you will be paying monthly costs like the mortgage, insurance, property taxes, and maintenance expenses. You also want to reduce the amount of time that your investment is at risk. Experienced flippers aim to complete renovations and relist properties within 3 months.
Tip #8: Take advantage of leverage with a great loan
The easiest way to save on your next fix & flip investment is to obtain financing from a trusted real estate lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. If you are an investor looking to finance a home flip, RCN Capital has competitive loan options available. Connect with us today to discuss your next real estate investment.