If you have ever seen one of those flipping shows on TV where they buy a home in need of some TLC, and then fix it up and resell it, you might be thinking this doesn’t look that challenging. However, what you don’t see are many things that go on behind the scenes.
House Flipping Key Considerations
Before you run out and buy a home to flip, it is worthwhile to review these key considerations. First, you will need some sort of house flip financing to purchase the home. You don’t want to get a conventional mortgage because it is not a good choice for flipping homes.
Instead, you want a short-term loan that gives you enough time to fix the place up, relist it on the market, and sell it. At closing, you pay off your flip funding loan and any extra money left over will become your proceeds from the sale.
The reason you want this type of mortgage is the only payment required is to pay the monthly interest on the loan. That’s it. There is no principal to pay, so the monthly payments are much lower than conventional mortgages.
Second, you need to consider potential risks if you cannot rehab the home as quickly as you want. You could lose money on the investment where you are stuck paying property taxes, house insurance, and so on. If you don’t flip the home by the due date on the short-term flip financing, then you could have to convert the loan into a conventional loan.
Next, and probably one of the most important considerations, is to spend time doing research on the homes you are considering flipping. Always make sure to view the home and determine how many repairs will be needed.
Take the time to estimate how much those repairs will cost. These costs will come out of the proceeds from the sale after your fix and flip loan is paid back and any other closing costs. This will give you an idea of how much you could make flipping the property.
You will also want to research the local real estate markets to find out whether property values are increasing or decreasing. If they are decreasing, be careful, as you could lose money when it comes time to sell the home.
You also want to consider how fast homes are selling in the area. When homes are selling quickly within a few months, it means you will be able to flip the home faster and not get stuck having your money tied up as long.
Last, take the time to establish a relationship with an experienced real estate agent and find a hard money lender that specializes in fix and flip funding financing. These two relationships will become essential as you gain experience and grow your house-flipping business.
How Much Money Could I Make Flipping Homes?
The amount you make on flipping homes can and does vary. While you might see on those TV shows the flipper is making tons of cash, don’t expect this initially. Learning the ins and outs of house flipping does take a little time.
Initially, your goal should be to be able to flip the house and walk away with cash in your pocket. With practice you will improve. Plus, you will develop business relationships with your realtor, hard money lender, housing material suppliers, contractors, etc. These relationships can translate into materials discounts and better terms and rates, resulting in reduced costs.
For further information about house flip financing or to apply for fix and flip funding, please feel free to get started online or contact Sunset Equity at 866-291-3412 today!