Suggestions for First Time Flippers
Buying real estate properties for a bargain, fixing them up and then reselling them for a profit is a great way to make money as a real estate investor. This is often referred to as “house-flipping” or doing a fix-and-flip. You look for a home, buy it cheap, fix the home up, then sell it for more than what it cost you to buy and fix it up. You can make a huge profit doing this, and there are a few ways to improve the experience or ensure you do not lose money.
Plenty of real estate savvy investors are making money with fix-and-flips but while it looks and sounds easy to do, house flipping has some risks involved. If there are more repairs than estimated, the flipped property does not sell immediately and/or you encounter other unexpected issues, an investor might not break-even.
Here are several suggestions to help you be successful:
- Get a Mentor:
Successful “flippers” educate themselves and know the ins-and-outs of the real estate market. If you are just getting started, one helpful thing to do is to find a successful house flipper to mentor you. The things these seasoned investors have experienced or learned along the way are invaluable. Offer a percentage of your profit for advice if you need to. Then do your research on properties in your local area and find a house you would like make an offer on.
- Save Money On Materials:
Buy the materials to fix up your house yourself. Contractors do supply materials but they will mark up the price of the material. If you buy the materials yourself, you will save money and pay them for labor only.
Although costs for materials vary, it’s best to get to know your local stores. Some stores who offer discounts to contractors will give you the same deal if they know you are an investor and plan to do more than one house. Don’t be afraid to ask for a discount. Home Depot, Lowe’s and Costco offer great deals. Also, watch for any clearance sales on materials. You can also go to second hand stores to find great deals at a lesser price than buying new materials.
- Save Money On Labor
Some investors buy a house during off-season. This way they can complete the job on time since their contractors have less of a workload on their hands and can focus more on the job. Contractors are sometimes cheaper in the off-seasons as well.
Hire reputable subcontractors, instead of a contractor, and run the job yourself. This can save you money because a contractor also marks up the price of the subcontractor. Doing some of the work yourself will also cut labor costs.
- Save Money and Time by Using a Realtor
Once the home is fixed-up, and if you plan to sell the house (vs. keeping it as a buy-and-hold property), studies show if you use a reputable real estate agent, your property will sell quicker than selling without one. The longer you hold on to the property, the more holding cost you incur. Realtors know plenty of possible buyers and having them list your house on the MLS helps sell your property more quickly. While they are selling your house, you can spend your time looking for your next deal.
Overall, utilizing these few basic tips will help you in the process of doing a fix-and-flip. All it takes to be success is having the right attitude and information. And getting out there and doing it.
Knowledge + Action = Results