Flipping homes is the process in which one buys a property with the intention of quickly renovating and on-selling it in order to return a quick profit.
(Don't be fooled by all the hype around flipping homes, it is a business and an art. Done well there can be a lot of money in flipping homes, done poorly and your return can be minimal or in worse cases yield a negative return.)
Build a strong team
A strong team is the foundation of home flipping. The most successful home flippers we have seen understand real estate and also share strong connections with trades which can complete the renovations in a timely manner.
Home flipping isn't for everyone, it's a business and requires a lot of devotion and attention. Ensure you have built the right team of trades/professions/friends which have a firm understand of what you're trying to achieve.
How do I fund my home flipping venture?
- Private Funding: Funding your home flipping venture can be the hardest place to start for some individuals - You might have been to a home flipping seminar where they sell home flipping as an amazing venture. Most of these seminars sell their product which is private funding. The problem with private funding, if you're just starting out, is the high-interest rates they charge. Any money you borrow, you're paying interest on until the day that home sells.
- Major Banks/Lenders: Depending on your financial circumstances, it's always best to look at the major banks to see if they will fund your venture.
- Your own team: We have always seen this as the strongest way to start if you are working as a team of home flippers. Strength and buying power is in numbers. If everyone in your team is putting down a pre-defined amount, it will help with the purchase and ongoing fees of the flip until the renovations are complete and the property is sold.
Selecting a property
If you're set on the path to flipping homes, you first want to start out by selecting a property which meets the right criteria...
- Is priced under market value (repossessed or priced to sell)
- Needs renovations or other major work
- Your final ROI calculation meets your goals (Acquisition plus renovations less expected sold price)
If you're working with a broker, they will already understand your needs and help you find properties which meet your goals and exact criteria.
There are many more detailed calculations you will have to do, but a lot of your success will come from selecting the right property to flip.
Renovate and sell
You've chosen and bought your first property. It's time to get to work as fast as possible before getting it back on the market. If you're already working with a real estate broker, they will also help advise you on the best improvements to ensure the property is sold for top dollar and in a timely manner once everything is done and it's market ready.
Based on changing market conditions you might need to be ready to hold the asset for longer than originally anticipated. For this reason most home flipping teams are working on 2,3,4+ properties at any one time to ensure they always have something they are working on and an ongoing growth in their overall equity/regular returns.
If you've made the choice to start flipping homes, you can get started by setting up a Property Alert and start recieiving instant notifications about only properties which meet your exact criteria.