How to Get Started Flipping Houses
By Keran Smith | Category: Uncategorized
How to Get Started Flipping Houses
Getting started flipping real estate can seem daunting, especially if you are flipping houses with no money upfront. It’s possible, but requires both extensive planning and strategizing. If you’re serious about making money with real estate but don’t know how to get started flipping houses, here are some pointers to kick start your journey.
Consider Your Exit Strategy
It may seem out of place to evaluate your exit strategy at the forefront of your house flipping journey, but your exit strategy can not only influence the property you choose, how you will pay for the property and renovations, and even what renovations you will make. Take this opportunity to review your long-term goals and determine if generating passive income through a rental portfolio is right for you, or if a fix-and-flip strategy is more your speed. Armed with this decision, you can better roadmap your purchase.
Prepare Your Finances
Historically, cash has been the only way to purchase deeply distressed real estate in need of extensive repairs and renovation, as these usually don’t meet the requirements to qualify for a traditional mortgage. While cash is most certainly is still an option, a myriad of new financial opportunities now exist to help you start flipping houses with no money out of pocket. Even buyers who have the cash to purchase fixer-upper properties outright elect to leverage their deals, allowing them to manage multiple fix-and-flips at once or to allocate their money to other ventures.
Hard money financing (short-term loan programs that specifically cater to distressed real estate purchases) can be valuable in providing flexibility for your project since the anticipated renovation costs can usually be rolled into the loan. If you decide that flipping houses with no money up front is for you, what can you do to secure funding for your project?
- Work on your credit score. Even if your credit isn’t perfect, there’s a lot you can do to improve it in the months leading up to your purchase. Lenders will look at your payment history, total debt, savings accounts and other factors. Hard money loans generally rely less on the credit score of the applicant than traditional home loans, but credit score can still influence your rate and other factors.
- Work with a company who can not only help you find the perfect property for your project, but also provides access to reputable hard money lenders. Working with an experienced partner dedicated to providing customized house flipping loans can streamline the process immensely and help relieve the stress of your first flip project.
Find a Mentor
You could ask a flipper in your network for advice on your project, but there are too many moving parts to make this trek without a dedicated mentor. Novice and expert flippers alike can benefit from a solid, seasoned mentor who can provide access to off-market properties, offer hands-on advice and resources, and help organize the process – whether it’s your first flip or your fiftieth. Their experience and resource network can allow you make the most of your time and get your renovated property on the market for sale or rent as quickly as possible.
Once you’ve learned how to get started flipping houses, you need to make sure that you’re doing everything you can to maximize the property’s value. For starters, preserve as much cash as possible for your next flip. Here are a few tips on how to do just that.
- Investigate off-market properties that aren’t available to the public. These are often foreclosures or other distressed properties in perfect condition for a flip. This private inventory gives you a competitive edge in finding the best property with the most profit potential.
- Don’t over improve. If your purchased property is in a neighborhood where properties have laminate countertops and linoleum floors, don’t add custom cabinets, expensive tile floors and granite countertops – you won’t get your money back. Over-improving your property in comparison to the rest of the area may attract buyers to the property, but it’s associated price point won’t necessarily be able to compete with what buyers are interested in paying.
- Manage renovation budget and timing carefully. Mapping out a budget and timeline for your project immediately after purchasing your property is imperative with every project (your mentor can help you outline these costs and timings). This will help you make sure that everything stays on track. Time is money so it’s critical to stay on schedule and limit changes to the scope of work.
Flipping houses by yourself isn’t easy and you will often find that you have more questions than answers. Keeping the endgame in mind, preparing yourself financially, and having a mentor to walk you through the process will not only help alleviate the stress of doing something for the first time, but will also provide the peace of mind as you learn how to get started flipping houses.
Don’t have a mentor yet? Connect with our industry specialists today!