Flipping a home, which is the process of purchasing a house, renovating it, then reselling it (ideally for a sizeable profit), is a great hobby for those who are willing to dedicate themselves to the trade. Anyone who gets into this business expecting a simple process is in for a nasty surprise.
While experienced real estate pros may be able to turnaround their houses with the snap of a finger, there’s a lot for first timers to learn. You have to learn all the nuances that separate investing in smaller properties or commercial property investing, what to do with renovation financing and renovation lending, learn all about secured short term loans, and determine where in your community to look.
While you can’t learn everything you need to know about house flipping and renovation financing from a single blog post, you have to start somewhere. Here are some tips from first-time house flippers to help your decision making process go smoothly.
1. Always educate yourself
The more you know about the real estate world, the better. Make it a goal to read something new everyday. Always find more relevant information on the topic at hand, then study, study, study, and study some more.
2. Find a mentor
Flipping houses can be hard work, and many people start off by learning a lot of valuable lessons… the hard way.
If possible, find a mentor who has been through the process a couple times already. Learn from them, and especially take note of their mistakes. Ask if you can help them with their next project as a way to gain firsthand experience. Then, have them help you develop a plan of action surrounding what they have done successfully in the past. Remember, collaboration is key.
3. Understand the ins and outs of purchase contracts
A full 59% of homeowners say they wish they had understood the terms and details of their mortgage better, and that goes for home flippers as well! You are spending a good chunk of change on your home, considering that as of March 2016 the average home sale price in the United States was $186,000.
Also make sure you understand exactly what your home equity is worth throughout every step of the process. Home equity varies per household, and the median amount of home equity for those 35-years-old or younger is around $20,000. If you are at all confused, make sure to talk to a renovation financing expert.
4. Develop a formula, then stick with it
It is important for any home flipper to develop a standard formula to adhere to that calculates how much you are willing to pay for a piece of property and how much return on investment you expect to get from the sale. These can be done manually or digitally.
5. Get out there and do it
Your business will not be perfect after your first try, but you do have to try for the first time. Don’t be afraid to throw yourself into this project.
These tips are beneficial for those looking into both commercial real estate investing and smaller residential properties. Ready to get started? Call the experts at Secured Investment Lending today.