Tips for a First Time Flipper
House flipping has continued to thrive during the housing recovery and has attracted many would be first time investors looking to try their hand at flipping houses. While the potential profits are a big draw for potential investors there is homework that needs to be done by the investor before beginning the project to ensure the highest probability of success. A few of the tips listed below should serve as a starting point for how to approach a flip as a first time investor.
Choosing the right house to flip is a great way to start the overall success of the investment. According to an article from realtor.com investors should look for homes that have “good bones” meaning that they are structurally sound and have a lot of potential to be fixed and resold as good quality homes to make a sound profit for the investor. Having a good base to build around will help to make the flip easier on the investor and their budget.
Once an investor is able to find a good property they’ll need to determine how much they’re willing to pay for it. Running comparables for other similar properties that are in the same neighborhood can provide a good sense of what the home would be worth once repairs have been made. The After Repair Value or ARV is another great estimate for what the home will be worth after the rehab is been completed. A good rule of thumb is to keep your purchase price and rehab budget below 70% of the ARV.
Finally investors should network and find out who the best local contractors are and who may be the best to tackle their project. Investors should ask for estimates on renovation costs from contractors and get references from previous clients who can testify to the quality of the contractors work, hiring a good quality contractor goes a long way in helping the entire flipping process go as smoothly as possible. Investors should also budget conservatively and plan for any unseen extra costs that may occur during the flip to give them flexibility should these problems arise.
Flipping houses can be very exciting and when done right very profitable. By picking the right property, estimating expenses correctly, finding the right contractor to do the work, and having a sound estimate for the resell value of the property once the rehab is completed can put the first time investor on the path to great investing success.