Over the last decade, house flips have become increasingly popular short-term investments. Purchasing fixer-upper homes, carrying out necessary repairs/renovations and selling the houses for a profit has proven to be a lucrative venture for a fair number of flippers. Still, not every flip goes off without a hitch, especially for first-timers. In fact, depending on how you go about your first flip, you may ultimately lose a lot more money than you stand to make. With this in mind, anyone looking to turn a healthy profit with their first house flip should consider the following pointers.
Reduce the Risk of Last-Second Surprises
The last thing you want is to find significant problems with the property after renovations are well underway. Not only do unpleasant surprises stand to mess up the project’s timetable, they can also act as a drain on your financial resources and result in you losing more money than you’re able to make from the eventual sale. In some instances, sellers actively attempt to hide issues from buyers. However, it’s equally possible that the seller was unaware of any problems that present themselves late in the game.
One way to significantly reduce the risk of last-second surprises is enlisting the aid of a certified home inspector. Per the title, this person will meticulously inspect the property and record any issues they stumble upon. Some people opt to forgo home inspections, as they believe that any pressing issues will be readily apparent. While this rationale is somewhat understandable, it’s also extremely misguided. In fact, some of the worst problems that can affect a home are only discernible to seasoned inspectors. So, if you choose to roll the dice and decide against a home inspection, just know that the consequences can be rather costly.
Research Local Home Values
As many experienced real estate investors will tell you, a home’s location should be regarded with more importance than the property itself. So, when exploring prospective flips, make sure to research home values in its respective locale. Depending on local home values and real estate prices, a certain flip may not be worth your time, energy and resources. If you discover that you’re highly unlikely to get your desired price in a particular area, it might be a good idea to shift your focus to other options.
Enlist the Aid of Experienced Investors
Since this is your first flip, you may benefit from seeking advice from experienced real estate investors. So, if you have any friends, family members, neighbors or coworkers who have experience flipping homes, managing rental properties or taking part in any other real estate-related endeavors, don’t be shy about asking for assistance.
You may also want to consider reaching out to a successful real estate investment company. The right company will be able to point you in the direction of profitable flipping opportunities, as well as other investments you may find worthwhile. If you’ve been looking to ask someone, “What are the best short term investments?,” don’t hesitate to schedule a consultation.
Do Business Exclusively with Licensed Contractors
Even if you’re reasonably skilled at carpentry and home improvement, you’re more than likely going to need contractors when flipping your first house. Furthermore, if you have little to no experience in those areas, you simply won’t be able to flip a house without the help of dependable contractors.
While there’s no question that hiring licensed contractors can be expensive, this is no excuse to go the unlicensed route. Although unlicensed contractors may appear to charge less at the outset, hiring them ultimately stands to lose you a considerable sum. First off, unlicensed contractors have little incentive to not walk away from difficult jobs or finish work on time and/or on budget. After all, it’s not like they’re going to lose the licenses they never took the time to obtain. Secondly, if an unlicensed contractor gets hurt on the job, they’re liable to come after you for medical costs. Conversely, licensed contractors have insurance for both themselves and their employees.
A single successful house flip stands to earn you a small fortune. However, while house flipping can be an effective vehicle for generating large amounts of money within short time-frames, most prospective flips are far from a sure thing. A variety of factors help determine how profitable a flip ultimately turns out to be, and if you approach your first house flip believing that success is guaranteed, you may find yourself in for a rude awakening.