Of all the houses that went on sale in 2019, 6.2 percent of them were flipped.
More sellers than ever before are exploring flipping a house. In 2019 alone, flipping houses hit an eight-year high. The potential upside can be tempting, especially if you can hit the sweet spot between not needing too many repairs and a healthy profit margin.
For a flip to work, though, you need to select the best property. Here’s a detailed five-point guide to help you spy out the right house for a flip.
Location, Location, Location
An old real estate expression says the most critical factors when valuing property are location, location, and location. Few things should be higher on your “flipping a house checklist” than securing the right location.
You need to assess where the property is situated, beginning with the city and working your way down to the neighborhood. Any proximity to positive factors will stimulate appreciation in the property’s value.
For you to pick a house that can move, you must grasp its location in the context of who the target users will be. For example, if you’re looking to flip a house targeting young families, your location must include a desirable school district as a selling point.
Put yourself in the mind of the buyer and research as they would research it. Utilizing the same websites your buyers would use in learning more about the area is a start.
Always make sure that as you gauge the location, you’re doing so while using the buyer’s perspective. Whatever is important for them is what will determine a location’s value and secure your success.
Avoid One-of-a-Kind Houses
Avoiding unique houses seems counterintuitive, right? After all, don’t people want to buy that which very few have? It turns out, in real estate, it is quite the opposite.
When you see a listing that touts the house as “unique,” it’s essentially conveying that the house is unorthodox. For many buyers, that’s an issue since selling off such a home can take a lot longer.
That does not mean you can’t take a unique house and work on it. Just ensure you make room in your budget for transforming such a house to conform to more standard designs.
Don’t Let the Lack of Curb Appeal Faze You
Anyone flipping houses for a living will tell you that there is hidden beauty behind houses that don’t seem to have an immediate curb appeal. There are many retail buyers who overlook a good deal because they focus too much on curb appeal.
As you look around for potential purchases, you’ll find houses with ugly siding, untrimmed bushes and trees, and weird-looking brick. The trick here is to assess what it would cost you to fix the issue and develop curb appeal.
For example, mulch is an affordable material that can make for an easy border. Your goal isn’t to make the house look like a professional landscaper lives there. Just make it look nicer, and you’ll snag buyers.
A House Inspection Is a Must
Whenever you are buying property, you need to inspect it for obvious and not-so-obvious issues. With flipping houses, a house inspection becomes a critical component that either moves the deal forward or not.
If you don’t accurately assess the condition the house is in, your protected profit margin will fly out the window due to extensive rehabilitation costs. Begin your walkthrough with the house’s foundation to avoid any major cracks.
The stone/brickwork on the house should also not be pulling away from the structure. In addition, there should be no significant cracks present or any separation problems.
Next, you should inspect the grading to find out if the property drains water away from the structure or not. While at it, ensure you check the draining too for any potential problems.
If there’s a basement, is it dry? The same applies to a crawl space as any moisture can lead to significant repair work.
During your walkthrough, look for things you can save on as they can offset the rehabilitation expenses. A home inspection should also help assess what you can do to add value to the property and whether it’s enough to be profitable.
Work Out Your Profitability
There needs to be a detailed market analysis to signal if there is a healthy enough potential profit margin before you take on the house. If you’re looking for external money to finance a house flip, the stakes are even higher.
While everyone looks for a different profit margin to make a flip worthwhile, having at least 30% profit potential is reasonable. You should only take below 30% if the house requires very little work.
The one thing you shouldn’t do is not pay a sizable downpayment to buy a house and rehabilitate it using credit card debt. No matter how the market looks as you plan the purchase, you can’t predict the future.
Should you take on credit card debt to rehab the house and it takes longer to sell it, you’ll accumulate significant debt quickly. Never flip a house without plenty of cash at hand.
Having cash on hand helps you rehabilitate the property faster. The longer you hold on to the property, the higher the risk of market forces turning against you.
More cash in hand is also crucial for your profit margin if you plan to take out a project loan. The more cash you can dedicate to the down payment, the higher the profit margin as you won’t pay private mortgage insurance.
Find the Right Property and You’ll Enjoy Flipping a House
More people than ever are interested in flipping a house.
While the potential profitability can be compelling, you need the right property for a good upside. Pick up on the markers that make for a good property to flip to drive your profit margins towards 30%.
If you’re the do-it-yourself (DIY) type, a house flip is one of the many exciting DIY projects you can explore. Our website is dedicated to inspiring you to build something beautiful with your hands.
Check out more of our content today for tips and actionable ideas on home DIY projects you can try.