Are you thinking of going into real estate? Maybe it has been a long-time dream of yours, but you just kept on postponing it until the right moment. Well, you have probably realized that there isn’t a perfect moment. Something unexpected always happens, so you may be forced to take a risk.
The big question now is whether investing in flipping houses is a smart idea. In the following article, we will answer this question from what we were able to learn from the experts on house flipping at Premier Real Estate in Raleigh North Carolina. Also, we will tell you everything you need to know before going into this line of work.
Is It the Right Time?
Even though it may seem that now is the worst time to enter the world of real estate due to the pandemic, the answer is completely the opposite. Why? Well, the interest rates are low right now. The truth is that they have never been more favorable for first-time home flippers. Homes are literally flying off the market because we are currently at a seller’s market.
Still, this doesn’t mean that you should jump at this opportunity. It can be a risky investment, after all, if you are not familiar with all the ins and outs of the process. As already stated, we will discuss this in great detail further on.
What Is a Seller’s Market?
In a nutshell, the seller’s market occurs when the real estate inventory cannot meet the buyers’ demand. Simply put, there are not enough houses on the market, and as you can assume, this situation is very beneficial for the sellers. Why? Well, because buyers must start competing with each other, and generally speaking, they cannot afford to negotiate the price. Not only that, but sellers can also increase the price, and it will be easier to find people who will accept it. It means that people spend more money than they originally intended. This is also when bidding wars occur between multiple buyers of the same property. Eventually, sellers manage to get a significantly higher price.
Even though this all sounds great, there are some tips that sellers should use. First of all, you should set the initial price around or slightly below the property’s market value. Yes, this cost will significantly increase, but you first have to attract potential buyers, and this is the best way to do it. People won’t even consider properties that are over-priced right at the beginning.
What’s more, there is another trap sellers often fall in. When they put a home on the market and start talking with potential buyers, they tend to focus on those with the highest bid. This is understandable, but still, just because someone says they can offer a lot of money, it isn’t necessarily true. Due to this reason, you have to investigate each person’s finances in great detail before making the final decision.
How to ensure success? As with any business, there are numerous things you have to know. No, you cannot expect to earn profit just because you have flipped a house. There’s so much more to it, and here are some tips you should follow.
Set a Budget
Before you even start looking for property to flip, you must set a budget. The most important thing is not to exceed it. Yes, you should have an average one, but it is also essential to determine the maximum amount of money you can afford to invest.
If you have already set an eye on a property, you have to do some calculations. The general rule is that your maximum investment shouldn’t exceed 70% of the property’s value after it is renovated. So make sure to include the current price of the house, as well as the cost of repairs to see what the final value will be. Then calculate 70% of that price. If you can afford to invest that much, you can proceed with the process.
Nevertheless, don’t forget to include some unexpected expenses. Even if you have a bullet-proof plan, things rarely go as you want them to, so make sure that you will be able to pay any additional cost.
Find The Right Contractor
Now, here is another trap you must avoid. Yes, we understand that your goal is to save as much money as possible on renovations to increase your overall profit. However, this doesn’t mean that you should go with the cheapest contractor you can find. Keep in mind that there is probably a reason why their fee is so low, meaning that they probably don’t do the best job. Basically, you can end up with a property with many faults that you may have to fix. What’s more, you cannot attract buyers this way. No one is going to be interested in buying a house that needs a lot of repairs. Therefore, in order to avoid this potential problem, you should go with professionals who can do high-quality work. Needless to say, their fee must be within your price range.
Understand What the Buyers Want
Renovating an old house and flipping it for a profit is no longer enough. When looking for a home, people want to get a high-quality product basically. They want to get the same amenities that a completely new house can offer them. Hence, your job is to understand what these amenities are. Make sure to conduct research and investigate new homes, and then think of the things you can include in your flipped home. These may include beneficial amenities, smart technology, and even modern design. According to experts, you should pay close attention to the design of bathrooms and the kitchen since these are the most valuable areas of the home. It goes without saying that you shouldn’t overdo it and make sure that everything is fully functional.
Don’t Forget to Advertise
Many people believe that potential buyers will just start coming in as soon as they finish with the renovations. Sure, some will, but you will have a lot more options if you invest some time and effort into marketing. You have to spread the word about your property and inform people that you have something to offer, too. No, don’t worry. It isn’t necessary to invest big bucks into marketing. Nowadays, there are many digital marketing strategies you can implement, so you just have to understand how everything works.