The majority of what most people know about flipping homes is learned via television programs and, while those shows have their good and bad points when it comes to painting an accurate picture of the flipping game, there is much more that you should know before you begin a flipping adventure.
1. Know Your Cash
Make sure you have enough funds for the carrying costs (which are defined as mortgage payments, taxes, and utilities) for the duration of the time you will own the home. Create a realistic deadline for the completion of the work needed to make the house saleable as well as a drop-dead date by which the house must be sold. Any time beyond that is going to eat into your profits. If you haven’t the proper amount of cash on hand, things can get sticky the longer you have the home.
2. Know Your Area
Make sure you research the neighborhood and the surrounding area of the home you’ll be flipping. If you don’t have a good working knowledge of what’s going on around your flip, you could be in for some unwanted surprises. There could be projects such as new highways or industrial parks that could impact the future value of the home.
3. Know Your Comps
What are the comparable properties in your flip home’s area? How long do homes in that area tend to sit on the market? Is it possible to turn a profit with a flip in that neighborhood? A little homework up front can save you a lot of money on the back end. And remember, no matter how nice of a job you do on the renovation, if you did it on a home in the wrong neighborhood, you could take a financial bath.
4. Know Your Improvement Goals
The only thing as bad as under-improving a flip house is over-improving one. If you don’t do enough to make the property right, would-be buyers are going to see it as a fixer upper and wonder why you’re asking market price. If you over-improve, you’ll cut into your profits and leave money behind you didn’t have to spend.
5. Know the Appeal of Curb Appeal
You know the old saying: you only get one chance to make a first impression. What a buyer sees at the curb could make or break the deal right then and there. Landscaping, painting, new blinds or curtains – whatever it takes to make the home pop at first glance – that’s money well spent.
6. Know Your Audience
As much as it looks like fun to get creative with your restoration, you need to avoid letting your personal taste get in the way of making a saleable property. Designs that are too specific or trendy could very well turn off potential buyers. Most people want to put their own stamp on their new home. The best bet is to be as neutral as possible so that you can appeal to the largest possible audience.
7. Know Your Taxes and Fees
If the property taxes on your flip house are too high, it could scare away a majority of potential buyers. Then you will be stuck paying those high taxes when the house doesn’t sell. Know the tax rates going in, as well as Home Owners Association fees. Most are reasonable, but some neighborhoods really make you dig deep to live there.
8. Know Your Schools
The better schools in your target area, the more appealing your flip house will be to families. Keep that in mind as you shop for properties. A substandard school system doesn’t rule out a home’s possibilities, but it does change the buying audience.
9. Know the Limits of Your Skills
Don’t attempt what you can’t do. Electrical and plumbing errors can cause major damage if not done correctly. In many cases it pays to hire a qualified professional.
10. Know That Greed Doesn't Pay
There is no getting around the market. No matter how much you put into the property or how much you want to get out of it, the market will dictate what the home sells for. Price the home competitively. A buyer’s agent is going to warn their clients away from an overpriced home and it will sit there, unsold, costing you money every minute of the day.