Are you considering a foray into house flipping? This growing trend has become popular due to many home improvement shows that convey the potentially lucrative and exciting nature of buying, fixing, and quickly reselling a house as well as its many trials.
While some experts caution inexperienced buyers against jumping into house flipping, some individuals are perfect for this venture. Are you one of them? Here are five ways to tell.
1. You Can Qualify for Flip Loans. The financing for a house flip isn't the same as for a primary residence. You'll need something tailored to this type of venture, often from a private investor who can look for loan qualities outside the traditional home mortgage requirements. Research your ability to get a fix and flip loan — including finding high-quality lenders, having a larger down payment, and knowing how to appeal to a hard money lender.
2. You Have a Financial Buffer. The house-flipping industry generally calls for the investor to have access to some money of their own to provide a buffer in the process. This money might be used to reduce the amount of that loan, to pay vendors who can perform repairs before the house sells, and to cover a few losses on specific properties.
3. You Have Home Improvement Skills. While most house flippers use outside contractors to do much of the remodeling, you should be able to do some of the work yourself. If you have developed basic home improvement skills over the years — such as light plumbing, installation of tile and flooring, or landscaping — you save money and add to your profit margin. Bonus points if you actually enjoy this work and would look forward to the chance to hone your skills.
4. You Have a Network of Vendors. Ideally, you should have already established a group of reliable contractors, lenders, and other vendors to handle the renovations on your properties. Flippers need high quality, fast, and reasonably priced contractors who can work within your loan budget. If you already worked in the real estate or rental field, you may have this network built up. If not, start building yours.
5. You Can Play the Long Game. Even though the television shows portray house flipping as a "get rich quick" setup, real flippers often need time to build up a profitable business. After the first few sales and loan payoffs, you may find that you barely break even. But you learn more with each flip and eventually, you will know how to turn a profit. This takes time, though, so you must be a patient person.
Do you fit the criteria for a good house flipper? If so, get started by consulting with short-term fix and flip loan providers today.