With house flipping becoming an increasingly popular way to generate large amounts of income in a timely manner, there’s little wonder as to why so many of us are getting on board. However, for every success story you hear, there are bound to be several horror stories of flips gone awry. While many flips are indeed profitable ventures, others fall off the rails for a variety of reasons. So, if you’ll soon be trying your hand at house flipping, take care to heed the following pointers.
Research Local Property Values
Before making an offer for a potential flip, it helps to know how much you stand to make from this investment. After all, there’s no sense in purchasing a flip that won’t generate considerable returns. With this in mind, make a point of researching local property values before committing to a flip. Knowing what similar homes are selling for in the area will provide you with a good idea of how profitable this venture is likely to prove.
Research Local Housing Demand
Housing demand and property values often go hand-in-hand. Unsurprisingly, areas with ample demand for housing tend to have higher property values than areas in which demand is on the wane. Fortunately, there are a number of easy ways to ascertain how much demand exists within an area. Doing some research into population growth (or decline), the local economy, median income levels and crime rates can provide investors with a solid understanding of how much housing demand an area has, thus ensuring that they’re able to make informed decisions.
Insist on a Pre-Purchase Inspection
Investing in a flip that hasn’t undergone a pre-purchase inspection from knowledgeable professionals can have serious repercussions for your finances. You should never invest in a flip without a clear understanding of any issues that warrant repairs and/or renovations. This ensures that flippers are able to budget properly and plan accordingly. Needless to say, forgoing a pre-purchase inspection is liable to result in the discovery of hitherto-unknown issues once work is underway.
With this in mind, you should always make a pre-purchase inspection a prerequisite for any flip – or any other type of real estate investment. No matter how hard a seller pushes back against an inspection taking place, it’s in your best interest to remain firm. Should a seller outright refuse to allow an inspection to take place, take this as a sign that they’re attempting to conceal problems with the property and set your sights on other potential flips.
From an investor’s perspective, pre-purchase inspections don’t carry a downside – outside of ruffling the feathers of dishonest sellers, of course. Not only will an inspection give you a good idea of how much you’ll be spending on repairs/renovations, it may also serve to strengthen your bargaining power. Should an inspection reveal the presence of problems of which the seller was unaware, you may be fully justified in lowering your offer.
Work with Dependable Contractors
When undertaking single family renovation investment opportunities, it pays to work with the right contractors. For starters, any contractors with whom you do business should be fully licensed and bonded. While working with unlicensed contractors may strike you as a sound way to save money, this decision may cost you more than it stands to save you. Unlike their licensed contemporaries, unlicensed contractors have very little incentive to complete jobs on time, on budget or at all. Furthermore, if an unlicensed contractor becomes injured in the course of their work, you may find yourself having to cover their medical expenses.
So, before committing to do business with a contractor, confirm that they are fully licensed and bonded. Additionally, seeking out online feedback from past clients can bring you up to speed on a contractor’s work ethic and approach to customer service.
If gone about properly, your first house flip can net you a healthy profit within a relatively short span of time. Conversely, if undertaken in an improper manner, your first flip is liable to a relentlessly stressful and costly experience. Far too many flippers take their cues from reality television, which often makes the house flipping process out to be much simpler than it actually is. So, if you’ll soon be undertaking your first flip and want to keep problems to the barest of minimums, make use of the tips outlined above.