Buying and selling real estate properties is among the most popular type of investing with which lots of people have earned a ridiculous amount of money using the right skills, knowledge, timing and a little bit of luck. There are different types of real estate investing depending on the capital you have, the amount of risk you can handle, your investing timeframe and so much more factor. Among the most popular is house flipping.
House flipping is basically buying an asset (in this case the house) with the intent of selling it right away for a quick profit. It is a form of investment strategy and has two types. The first one is buying and selling the property with a little to no changes at all, selling it based on market condition. The other type is improving the house first with renovations or cosmetic changes. As mentioned, it is among the most popular ways to invest in real estate, and Brandon Turner gave us a guide on how to get into house flipping in his article at BiggerPockets.
Flipping Houses: The Ultimate Step by Step Guide
House flipping can be an incredible way to grow wealth fast – but there are dangers. Learn how to flip houses for fun and profit in this exhaustive guide
Image Courtesy of BiggerPockets
With that, let’s get to the puzzle. Below are thirty steps – one for each day of the month. No, I don’t expect you to flip a house in 30 days (it takes much longer!) but if you focus on mastering just one of these steps each day for a month, you’ll be an expert in just 30 days!
If you have any questions, I invite you to leave a comment at the bottom and let’s talk about it!
1.) Commit to the Flip
The first step in any real estate adventure is to commit. So many people want to get into house flipping or landlording and get really excited, but they don’t actually commit to going the distance. House flipping is not a hobby – it’s a business that can affect your financial future (either positively or negatively) so don’t go into this thing “willy nilly.” (Yes, I just said “willy nilly.” )
Decide you are going to do this and you are 100% committed to learning everything you need to learn to get there. Then, and only then, should you move on to step two.
2.) Educate Yourself on Flipping Houses
Step two is to get educated.
20 Best Real Estate Books BlogAlthough education is a lifelong pursuit, it’s also necessary to do before jumping into a house flip. I’m not advocating that you go and pay $50,000 for some kind of guru training camp – but I am suggesting you take your education seriously and buckle down to learn the basics.
As I mentioned in the intro, I can think of no better way to learn the basics of house flipping than The Book on Flipping Houses written by J Scott and published by BiggerPockets Publishing. Seriously, if you are planning on flipping houses and haven’t read this book through at least once carefully (and taken notes) you are not doing enough. If you’ve already read it – go back and read it again. Then read through “Flipping Houses for Dummies” and “FLIP: How to Find, Fix, and Sell Houses for Profit.” They are both excellent books for basic flipping knowledge.
Then, start to teach your spouse/kids/mom/dad/dog/cat what you’ve learned – as teaching is the best way to truly internalize knowledge. Don’t just look at the surface- try to get deep and understand how this stuff all works.
You don’t need to know absolutely everything in order to start flipping houses, but I’d advocate getting really good at the basics.
However, one last word of caution: Don’t get caught in this cycle for too long. You’ll never know everything… so dive into the education for a short while, learn all you can, and then move on.
3.) Educate Yourself on the Flipping Math
I decided to separate out the basic education from the math education because both are so important!
Without the right math going into a flip, you’ll never get the right money coming out of it. Understanding the math is the #1 most important trait in a successful flip, because the math determines how much you should pay, how much you should put into it, and how much you expect to get out.
To help with this, I want to encourage you to check out the BiggerPockets House Flipping Calculator. Watch the video below,and then go play with the numbers- find out how much you’ll really make on a hypothetical flip.
Then – do the numbers by hand as well, just to make sure you understand the math behind the calculators. If you are struggling with the numbers, go ahead and ask for help in the Deal Analysis forum here on BiggerPockets. There are thousands of investors in the forums every day, waiting to help.
House flipping might be an enticing investment with a great opportunity of earning a huge profit in a short amount of time. However, take note that you’re buying a house, and you need huge amount of capital, enough to purchase a house. Remember that home values vary from place to place. The average house price in Baltimore might be different from the average price of other cities.
How much does house flipping really cost? Diana Eastman of Lending Home wrote an article on how much does it really cost to flip a house. Read the article below and learn more.
There’s a lot to consider when entering the world of house flipping.
Two of the most common questions among new investors are: how much does it cost to flip a house and will I make a significant profit? To answer these questions and help you create a budget for your first flip, let’s go over a few key factors.
Rehab and renovations
Along with the cost of the house, there are costs associated with the rehab of the house, including the materials and hiring contractors to do the work you can’t (or don’t want) to do. Investors new to flipping houses will probably choose to start with single-family properties vs. multi-family properties to cut down on costs for rehab and renovations. Of course, the average renovation costs depend significantly on the current state of the home. A home that just needs some fresh paint and a new appliance or two will be less expensive than a home that needs a new roof, walls, or a complete gut job. Home renovations usually fall under three categories: cosmetic, moderate, and extensive. Aesthetic or cosmetic repairs are going to be the least expensive to make, but will contribute significantly to the profit you make when selling the home.
Buying a home that just needs some cosmetic repairs and some TLC can drastically improve your return on investment. New investors can learn as they go by starting with a home that just needs a little love, and work their way up to homes that need significant repairs. However, the beautiful thing about house flipping is that with the right tools, resources, and time, you can successfully flip a house regardless of your experience. You’ll probably learn a lot from trial and error, but that’s all part of the fun, right? The end goal is to get as much for the property as possible without putting a ton of money into it. Doing things like replacing cabinet hardware or giving an interior room (or two) a new coat of paint can give the home an upgraded feel and increase the purchase price. When it comes to buying new appliances, don’t forget to factor in the cost of delivery and labor to get them installed properly. Read the rest of the article here…
In simple words, you need a hefty amount of capital to start house flipping whether you buy and sell it as is or you’ll make some home improvements. If you don’t have the capital, you can opt for a loan. But is it that easy to get a loan for house flipping? Mark Ferguson answers this question in his article published at Invest Four More. Check it out below.
How Hard Is It To Get a Loan on a House Flip?
Image Source: Invest Four More
I flipped 26 houses last year and over 155 in my career. There is no way I could flip that many houses without getting loans on them. I have more financing costs when I use a loan to flip, but I make more money overall because I can flip more houses. So how hard is it to get a loan on a house flip? House-flipping loans are much different than the 30-year mortgages you get when you buy a house to live in, and most lenders will not lend on house flips. There are options for flippers like hard money, private money, partners, and certain banks that will loan on flips. It is easier for someone like me who has a lot of experience to get a loan, but new flippers can as well if they know where to look.
Why don’t lenders like to loan on house flips?
There are many lenders who will lend on owner-occupied houses or even rental properties. However, there are not many who like to lend on house flips. Most banks will not lend at all on a house if they know it is going to be a flip. Banks make their money from lending to people who will be paying them interest over many years. Some banks hold the loans, and many banks sell the loans to other institutions. There are almost no buyers for the banks that sell their loans when the loan is for a flip. That is why so many banks will not even consider financing a short-term investment property.
Is it better to pay cash or get a loan on a flip?
Should house flippers get a 30-year mortgage?
A lot of people may wonder why don’t house flippers just tell the banks they are going to hold the property so they can get a 30-year or 15-year mortgage on it? An investor may be able to pull that off once or maybe even twice, but eventually, the banks will catch on. If the banks see an investor selling houses over and over again right after they get a long-term loan, they will stop lending to that investor. The investor may not be able to get a loan for a rental or their personal houses because they banks will not believe they are not going to flip the house.
It could also be considered loan fraud if the real estate investor is telling the bank they are going to keep the property as a long-term rental or live in the property when they had the intention of flipping it. It may not be easy to prove what the investor’s intentions were, and it is unlikely the bank would ever go after the investor, but it is possible.
If you want to flip one house in your life, you might get away with using a 30-year mortgage to do it. Or, if you are going to hold a property for two years before you sell it, you will probably be fine. However, if you want to make a business out of flipping, you want to use loans that are meant for house flippers.
How much money can you make flipping houses?
How are house-flipping loans different from regular mortgages?
Mortgages on owner-occupied homes or rental properties usually have 15- or 30-year terms. That means the loan is slowly paid off on a 30-year mortgage over 30 years. The interest rates are very low on loans for owner occupants but a little higher on rental properties. Long-term mortgages are considered fairly safe for banks, although there will always be some foreclosures. See full post here…
Before getting loans to do house flipping, always remember to know the terms of the loans or if you gonna pay it the moment you did not get a return on investment right away. Be wary of large interest rates. It is much better to stay out of debt. House flipping is a good type of real estate with opportunity to earn huge amount of profit if done right and with a lot of patience.
If you own a home in Baltimore and you want to sell your house fast for various reasons and want to move out of the city the soonest possible time, Dependable Homebuyers can help you in selling your house fast. Visit our website https://www.dependablehomebuyers.com/ and we’re ready to help.
Dependable Homebuyers
1402 Belt St, Baltimore, MD 21230
(443) 266-6247
