So, you’ve decided you want to start flipping houses. Great! I mean, DIY and HGTV have tons of shows about flipping houses, right? You’ve got this.
There’s just one thing… Where do you start? Do you fully understand the significance of all the decisions to make before you even get to the flipping part?
When you’re starting something new, which also has the potential to have a huge payoff if done correctly, but can be equally detrimental if you mess it up, you should definitely have a plan.
This is why we put together a 2-part series of what we consider the more vital steps to take into consideration before diving into a new flip:
- First and foremost, you need to decide if you really want to do it and then commit to your decision.
-This is not a hobby, it’s a business. You can’t afford to start and not finish.
- Once you decide to do it, Get Educated.
Learn everything you can about flipping houses, research it, talk to people that have done it, learn from other’s mistakes so that you don’t repeat them, learn tricks of the trade. LEARN so that you can know what you’re doing. Then learn about Flipping Math. This is crucial to maintaining a financially successful flip. The math determines how much you should pay for the house, how much to put into your flip, and how much you can expect to get in return. Understanding the math is vital to a successful flip.
- Research Your Market.
Know what homes are going for in your area. How fast are they selling? Are there neighborhoods that are hotter right now than others? What property types and sizes are selling? Which ones are sitting? What’s not selling is equally important to understand. When you know what you’re looking for, go back to your Flipping Math and see if it still makes sense.
- Decide how you’re going to pay for your flip; taking all possible ways to fund your investment into consideration:
- All Cash – you have the money sitting in savings to fund it yourself.
- Conventional Financing – some people use bank loans to fund flips, however, not all properties will qualify for full conventional financing.
- Home Equity Loans or Lines of Credit – do you have enough equity in your personal home to fund your flip?
- Hard Money Lenders – these are private lenders that lend on high risk loans – like flips – who charge a higher fee or interest for the loan. These are perfect for flips because they typically have a 6 month to one-year maturity date. They also enable you to buy and flip the house, without using your own money, and fund quicker than conventional loans.
- Partners/Private Money – if you know someone with the money whom is willing to loan it to you, typically for a lower interest rate. This is usually a less expensive way to fund, but can be harder to find and difficult legalities.
- Combination – a combination of any of these forms of funding.
-You have multiple options; however, you need to know what you plan to do before you start looking to buy. Remember that good deals go fast, so have your funding plan in place.