If you have thought about flipping homes, these tips will go over all the things you should know if you are asking, how to find the right house to flip.
It is February 2019 and we are finally getting ready to close on our fourth flip project! It seems like it has been such a long time since our last flip. We looked back and our last flip house was a year ago in March. We would love to do more flip houses each year, but finding the right properties to flip is a lot harder than you think. When we are doing our flips, I always get asked how to find the right house to flip, so today, I am going to share the things we have learned and what we have to have to make sure a house is right to flip.
How To Find The Right House To Flip:
- Know The Market:
Flipping is going to look different for everybody because we all live in different places. The best way to know if a house is right for flipping is to first know the market. Is the market good for selling? Do you have a lot of first time home buyers in the area? Is there good inventory of homes that need work? What kinds of people are searching for the types of homes you would flip? Who is your target buyer? Are houses selling fast in your area? What area commands the most money for houses? Which areas should you steer clear of? These are some questions you should know the answers of before you start searching for a flip house. Make sure and do your research in the area. The answers to these questions will tell you if flipping is even a good idea where you live. The knowledge of the housing market around you is crucial to having a successful flipping venture.
- Know Your Skill Set:
How to find the right house to flip depends a lot on what your skill set is. You need to decide if you will be doing the majority of the work or if you are hiring it all out. The answer to this part of the equation will affect your budget and timeline. When you know ahead of time what your skill set is and what kinds of things you will need to hire out, you can make a better decision on a potential flip when you are touring it. If you are touring a potential flip and the work that needs to be done has to be hired out, the cost of the renovations will be much higher than if you do it yourself. If that extra cost is too high, the house is not a good candidate. If you can higher it all out and still make some money, then it might be a good choice. Knowing what you are comfortable doing yourself and what you need to hire out is crucial in the flipping process.
- Budget & Timeline:
I put budget and timeline together because they go together. A lot of people think that budget means the purchase price of the house, the budget for the renovations and then the selling price. That is all important, but you need to be prepared with a timeline for completing the flip when you think about the budget. The longer you sit on a property, the more it costs you in the end. That affects the budget. In flipping, time is money. You have to pay for insurance, lights, water, gas, etc. on the property while you have it. If you are getting the project financed, there are interest costs involved as well. All of those costs add up and need to be taken into consideration when you are planning the budget and timeline. The longer you have the flip, the more it is costing you. Timeline and budget need to be part of the same equation.
- Know Your Price Points:
If we think we have found a potential flip house, we sit down and figure out the four main price points. We start with the selling price. What is the property worth in the end? What do we think we can sell it for when we get it all done? The second price point is the renovation. What is it going to cost to get the house ready to sell? The third price point is to figure out the miscellaneous reno budget. We come up with a number to pad the reno budget because surprises always come up in flip projects that cost more than you originally had planned in the renovation budget. Be prepared ahead of time for the surprises. The final price point is the purchasing price. What can we buy the house for to make all the other numbers work and still come out ahead on the other end? All four of these price points are crucial. Take your time when coming up with the figures. This is the part that will tell you if the house is the right candidate to flip.
- Word Of Mouth:
Tell everyone you know that you are wanting to flip. Neighbors, family, friends, acquaintances – EVERYBODY. Once you get the word out, people will keep an eye and ear out for you. Word of mouth has been the best scenario for us. If you need to get a realtor involved, find one that you can trust and one who is willing to work for you and your goals. It is amazing when you can build a working relationship with a great realtor. You both have a goal in mind – they want to sell houses and you want to find great deals on houses that you can flip. When you find a realtor you like and trust, that relationship can become very profitable if you are willing to work together. A realtor has an inside look on houses coming up on the market and hopefully you can get a first look on potential flip projects before other people do.
How to find the right house to flip is something I asked all the time before we ventured out and did it on our own. We helped my dad do some flips and learned so much in that process that we have been able to take into our own flipping projects. We tell everyone who asks that finding a flip house is the hardest part of the entire process. They don’t come easily. When we do find one that we think has potential to be a flip, we go through the list above to make sure we have all of our bases covered. Going through these tips also ensures that we feel good about the project.
Have you thought about flipping houses? What is the main reason you haven’t done it yet?
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