More and more people today state they are unhappy or unsatisfied at their jobs. In fact, according to a recent Forbes article 52.3% of Americans stated they are unhappy or unsatisfied with their current job. This is truly an alarming number considering how much of our lives we dedicate to work.
With these dismal job satisfaction numbers, it’s no wonder people are turning to new occupations and business opportunities to find fulfillment and happiness in their professional lives. One such exciting business opportunity in recent years has been flipping houses as a business.
At first, glance flipping houses as a business might seem simple enough, after all, all you need to do is buy a house and sell it for more than you paid for it taking home the difference as a profit. In reality, though flipping houses as a business is a lot of work and can be very stressful.
If you’re considering flipping houses as a business or want to flip houses for a living we have broken down everything you need to know and consider before entering the exciting world of house flipping.
Things to Consider Before You Start a House Flipping Business
There are many things that need to be considered before jumping into the house flipping business. As with any business real estate or otherwise, the keys to success or failure lies in the details.
Know Your Strengths and Weaknesses
There are many different pieces of a house flipping business so it’s important before you get started to understand your strengths and weaknesses when it comes to house flipping.
By assessing your current skill set, you can determine any gaps in knowledge you might need to fill in, where to spend your time to maximize your profits, and what items are best outsourced to someone else on your team.
Different Aspects of the House Flipping Business
- Building and Construction
- Project Management
- Design
- Property Acquisition
- Sales and Marketing
- Financing and Bookkeeping
Know Your Local Real Estate Market Inside and Out
It is absolutely critical to know your local real estate market like the back of your hand when flipping houses. After all, how will you know whether a house is a good deal or not unless you have a thorough understanding of the real estate market?
Things you should know about your market include average sales price, average days on market, current inventory levels, types of buyers in the housing market and what each is looking for, price points in different areas of your market, school systems, and anything else that might affect the value of real estate in your area.
Capital and Rehab Costs
One of the most important aspects of any house flipping business is the capital and money necessary to run the business.
Where will the capital come from to purchase and rehab your homes, will you use your own funds, hard money loans, partner money?
Also before you start walking through homes, evaluating them as potential flips you need to have a general idea of how much money it will take to bring the home up to current market standards. If you do not possess this information you need to find someone that does because nothing eats up a profit margin like a runaway rehab budget. Which leads us to our next point.
Who Do You Know?
No one person can be the best at everything involved in the house flipping business.
This is why it’s never too early to start thinking about who you currently know in your life that can help you fill in those knowledge gaps and provide the skills that you might be lacking in your house flipping business.
How to Successfully Flip Houses as a Business
There are six main categories to focus on in order to have a successful house flipping business. Not paying attention to even one of these six key categories can cause your house flipping business to go under before you even get started.
Have a Plan
Any successful business requires a well-laid plan in order to operate smoothly and successfully. One of the first things you must do when starting a house flipping business is to develop a thorough business plan.
Things to cover when writing a business plan for flipping houses include goals and projections for your business, finances, and funding, systems for property acquisition and sales and marketing, as well as preliminary plans for construction and rehab of the properties.
Acquiring and Handling of Capital
In order to run a successful house-flipping business, you must have a good handle on all the numbers. This includes knowing where the capital is coming from to purchase and rehab the homes as well as where the money is going. You must have good accounting and bookkeeping procedures in place to keep track of the money.
Property Acquisition
If you don’t have a good supply of houses to flip the profits from a house flipping business can dry up pretty quickly. Because of this, you need to make sure that you have a system in place to consistently find new houses and inventory to flip.
Property Rehab
In most cases when house flipping you will be adding value to the home through updates and remodeling you perform to the home before the sale. So you need to have a clear understanding of how and who will be performing those repairs.
It’s preferable when it comes to property rehab to have at least a basic level of DIY skills and understanding of home repairs for two reasons. The first being it allows you to invest some sweat equity into the home in order to keep the cost of the rehab under control and to stay on the timeline. Second, by having general knowledge about home repair, you will be better equipped to effectively bid out the jobs that you either can’t or don’t want to do.
Sales and Marketing
If you can’t sell your finished flip for a profit and in a timely manner you will quickly find yourself out of business flipping houses.
This is why it’s so important to have a system in place to successfully market and sell your finished flips.
There are two main schools of thought when it comes to the sale and marketing of a finished flip.
Some flippers choose to market and sell their own homes by listing the home for sale by owner and using websites like Craigslist and Zillow for promotion and marketing. Choosing this approach in order to avoid paying expensive real estate commissions.
While other flippers choose to use the services of a real estate agent to market and sell their homes, feeling that the real estate commission paid is justified if it gets their homes sold quickly and for top dollar.
Each approach has its advantages and disadvantages but remember it’s difficult and time-consuming to try and do every job yourself. Depending on your strengths and weaknesses this might be a job you choose to outsource to a professional.
Accounting and Bookkeeping
While some people might find accounting and bookkeeping incredibly dull or boring it is an integral part of any successful house flipping business. Almost everything you do in your house flipping business is either going to cost you money or make you money so you must have a system in place to keep track of the flow of money and make sure you stay in the black while running your house flipping g business.
Flipping Houses as a Business Tips
- Understand all your financing options and know the pros and cons of each type of financing.
- Become an expert in your local real estate market where you plan to flip property.
- Understand the 70% Rule when house flipping. When looking for potential houses to flip most house flippers will not pay more than 70% of the projected after repair value of the home minus the cost of the repairs. This, in essence, provides the flipper with a built-in profit margin of at least 30%.
- Know what typical home repairs cost in your area or have someone on your team that does, in order to accurately estimate the cost of needed updates and repairs.
- Write more offers on potential flips. The more offers you write the better chance you have of getting a great deal on a property in addition writing more offers will also hone your evaluation skills.
- Find good contractors and subcontractors to perform repairs. Many times the biggest frustration for newbie house flippers is dealing with contractors and subcontractors that either finish the job at a snail’s pace, have poor workmanship, or don’t even show up at all. When looking for construction works and tradesman ask around, check references, and always get a second bid. In time you will develop a professional network of contractors and subcontractors that you know and trust but it takes time.
- Find someone that is already successful in the house flipping business and use them as a model when building your own house flipping business. After all, there is no need to reinvent the wheel when it comes to house flipping as there are already many tried and true methods from seasoned house flippers. Finding a mentor is a great way to shorten your learning curve when flipping houses as a business.
Recent Posts
Your bedroom is more than just a place to sleep; it's a personal sanctuary where you can unwind, relax, and recharge after a long day. Whether working with a small bedroom or a spacious suite,...
Are you ready to breathe new life into your living room? If so, look no further than modern living room colors, as they can transform your space from drab to fab. As the heart of the home, the...