It’s hard to miss the cultural movement of home improvement that has swept the nation in the last decade or so. Countless television shows teach beginners how to DIY everything from bathroom cabinets to renovated basements, and the hosts of such programs have become household names. Learning how to flip houses for beginners is a bit more complicated than you might expect, however.
Still, now is a great time to learn. Thanks in part to stay-at-home orders and the increasing popularity of telecommuting, there’s never been a better opportunity to put your thinking cap on and acquire skills that can help you invest in properties to flip. Equal parts challenging and rewarding, flipping homes as a side hustle can be a lucrative pursuit. It also requires a great deal of effort and planning.
Consider Your Location
Where you live, or where you plan to purchase your first investment property, matters. Southern Living explains that some cities, like Tampa, Florida or Birmingham, Alabama, are good places to buy a home to flip. Coastal Living echoes this sentiment, saying that Tampa is the best city on the coast to flip a home. Consider cost of living, the activity in the housing market, and the purchase price of an investment property before you move forward.
Don’t be fooled by low property prices. Sometimes, houses are cheap, but you won’t have much luck reselling them once they’re fixed up. Generally speaking, a lower-priced home in a hot real estate market is a good investment opportunity. However, it pays to talk to local real estate agents and contracts for more information before taking the plunge.
Similarly, if you’re planning to buy a home in an area popular with seasonal vacationers, but without much local population presence, be prepared to rent the home for part of the year and either occupy it or find a property manager for the remainder of the year.
Know What You Can Afford
When you’re first getting started flipping homes, you should have a firm sense for what you can afford before you begin. If you already own a home of your own, don’t overextend yourself financially. Just because a bank is willing to extend your credit or open a second mortgage for you doesn’t mean you should sign on the dotted line if it won’t be sustainable. In many cases, a bank will prequalify you for a mortgage amount far higher than what you can comfortably afford, so proceed with caution.
Additionally, renovation costs are a critical consideration before you buy a home. Have the home assessed, both traditionally and by a contractor you have vetted. Find out the value of the home, and then let your contractor tell you how much it would cost to get the work done that the home requires. Take this into consideration when making an offer on the home.
For instance, if you can purchase a house for $150,000, but it will need $100,000 worth of renovations to be reasonably successful on the market, be sure the market in its area will bear a $250,000 home of its type.
Realistically, though, you’ll need to expect your renovation costs to far exceed whatever you’ve budgeted for, so add ample space in your budget. Unexpected costs are not just common—they’re essentially inevitable. In addition, you want to make a profit on the home. As such, your $150,000 fixer-upper might really need to sell for $300,000 to be worth your while.
Make it a Blank Slate
When you’re flipping a home or buying a rental or investment property, you should keep in mind that you’re not the one who is going to live there. Part of the joy of house flipping is, of course, pouring your heart and soul into the design and the process as a whole. However, you should avoid major design trends or bold statements in your renovations that would turn off potential buyers.
Trending ideas, like bold paint colors or a farmhouse kitchen, are certainly very popular. If they’re doing well in your market, it’s okay to consider them. However, once you are done with the renovation process and you’re ready to list the house on the market, or offer it up to renters, the usual rules of selling apply.
By allowing buyers or renters to imagine themselves in the space, you’re more likely to make a quick sale. This means clean, fresh looks without too many trending light fixtures or window treatments. Keep things basic and you’re more likely to enjoy a healthy return on your investment in less time.