The Art of House Flipping: A Beginner's Guide

Flipping a House: A Beginner's Guide

If you are a fan of HGTV, you will likely come across programs where people–sometimes professional real estate investors or ordinary individuals–take homes that are eyesores or in need of a facelift and transform them into jaw-dropping abodes. They then sell these properties, turning a tidy profit.

Welcome to the world of house flipping. This hobby has grown in popularity, encouraged of late by the pandemic-fueled rapid rise in home prices. However, it is not as easy as it looks on TV.

Continue to read to find out what it takes to become a house flipper.

How to Get Started with House FlippingHow to Get Started with House Flipping

Since flipping homes isn't something you can get into overnight, you will want to make sure you have your finances in order and the right properties in mind first.

1. Set a Budget

A big financial drain is not having enough funds to finance your project. Don't go in conservatively, and multiply your budget by five. Whatever you think is enough, probably isn't. Especially if this is your first time in the world of flipping.

2. Find the Perfect Property

Eve Alexander from Buyers Broker of Florida says this about the perfect property.

"If you don't have a massive budget to work with, look for properties that best fit your current finances. Browse through foreclosures, auctions, and short sales to see which ones best match up with your budget and renovation ability."

Don't hesitate to seek the guidance of a real estate agent who has experience working with house flippers. This agent might be able to lend insight with comps and price-growth projections to find neighborhoods and homes that will give you the best ROI.

3. Make an Offer

As a San Jose Realtor, my take on making an offer comes down to having your financing in line when the right property becomes available. Professional flippers often calculate a home's after-repair value to determine how much to bid. It's okay if an offer falls through; you can always have multiple properties in mind if one doesn't work out.

4. Set a Timeline

Not all property renovations require the same amount of money, which means they don't always require the same amount of time, either. Whether it is one month, or six, give yourself enough time to make the appropriate repairs and upgrades, and always factor in time for building inspections if needed.

5. Hire Trusted Contractors

Unless you have the chops to handle repairs and renovations yourself, you will want to hire reputable tradespeople to do the necessary work. Some contractors have full teams to work on all areas of the home, but not all. Check licenses and references for contractors you want to hire, and make sure their quotes line up with your budget and if they can meet your timeline.

Common House Flipping Mistakes

Common House Flipping Mistakes

There might be great financial opportunity in flipping houses, however, don't go into it without significant capital, guidance, and preparation. To be profitable, here are some common mistakes house flippers should avoid.

  • Not Enough Money. Your project will determine your budget, and not every home is a reality TV show-style renovation. There are full renovations, properties you can clean up and sell as-is, or homes that need basic repairs which you can put on the market for the next investor. Everything adds up quickly when you don't know what you're doing, and contractors take advantage if you're a novice.
  • Thinking it is Easy. While a license is not required to flip homes, it is not a fly-by-night business, and no one should take their cue from friends or TV shows. There are lots of amateurs, they see it on TV, and they get burned and lose a lot of money.
  • Not Setting up the Right Team. You have to work with experienced, reputable people. Your team can include an experienced house-flipping mentor, a real estate agent, a construction/remodeling company, a home inspector, a real estate agent, and an accountant to help you prepare your taxes, especially if you plan to turn flipping into a business.
  • Trying to do it Part-Time in the Long Term. It can be difficult to be a house flipper if you have a regular job. If you are working full-time and issues come up on-site, someone needs to be there. It is not a good side hustle, if you're going to do it, do it full-time.

The Bottom Line

Remember that there is a big potential for loss of time, energy, and money. Save your future self by keeping solid emergency savings in case you lose money. House flipping wouldn't be a good side hustle, you might want to start that way. That way, you still have your day job income in case a house flipping isn't your true calling or if the real estate market turns on you. Let professionals at Homeowner Experience Real Estate guide you in finding your new dream home in the many beautiful communities in San Jose, CA today!

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