Four Things to Know About Flipping Houses
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Have you ever tuned into one of those HGTV shows about fixing up homes and flipping them for profit? It’s hard not to get sucked into these shows, as the process looks so simple, rewarding, and profitable. And while the latter two facts can certainly be true, don’t get tricked into thinking it’s as simple as it looks on TV. If you’re going to become a profitable house flipper, then you need to understand a few things.
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You Make Your Money Up Front
Contrary to popular belief, you don’t make your profit when you put the house on the market. You make your money on the frontend by negotiating the right price. After all, if you overpay for the property, it’s nearly impossible to squeak out with a profit on the backend.
“It’s easy to make emotional decisions during such a large purchase and fail to negotiate properly, points out Green Residential, a Houston-based property management company, “but if you want to turn a real profit, you’ll do your homework.” Pay attention to home sales in the same neighborhood and speak with an agent who has a thorough understanding of the local market. They can save you a lot of pain and heartbreak.
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A Reliable Contractor is a Must
The key to any successful house flip is making cost-effective repairs and renovations that allow you to increase the value of the property. In order to make this happen, you need the services of a reliable contractor who knows what he’s doing.
You don’t need the highest quality contractor, but you also want to avoid the cheapest one. Aim for somewhere in the middle. You want quality work at a decent price. Ideally, if you end up flipping multiple homes, you can use the same contractor throughout.
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Educate Your Buyer
You should never hide the fact that you’ve fixed up a home from a potential buyer. In fact, you should flaunt it. “You put in the work—make a list. Disclose every system that was replaced, from HVAC to electrical and any structural problems that were repaired, writes Diana Olick of CNBC. “Let buyers know every detail of how this charming historic home is updated to today’s standards,” she continues.
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Don’t Overprice
The goal of most house flipping projects is to get the property rehabbed and sold as quickly as possible. The longer the home is in your possession, the more you have to pay. This means you need to price your home competitively when it goes back on the market. There’s no sense in overpricing. You may eventually get what you’re asking for, but it could be months down the road. Go in at the standard neighborhood price point and try to garner multiple competitive offers.
Ready, Set, Flip
House flipping may not be as glamorous as it looks on TV, but it can certainly be rewarding and profitable if you follow the right steps. Keep these tips in mind and make sure you surround yourself with the right resources and mentors. House flipping is not something you want to go it alone.
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