If you’ve decided to fix and flip houses as an investment strategy or as a source of income, you probably know that there are a lot of factors involved and a wealth of industry knowledge out there. If you don’t know where to start, here are three essential tips that every beginner house flipper needs to know.
1. You need to prepare for the worst.
House flipping can be very lucrative, but one bad flip can set you back significantly. You need to be aware of what can go wrong and have a back up plan if and when it does. When you’re estimating expenses for the flip, always add a bit to each amount to account for any issues that arise. Making sure you have those costs covered to begin with can save a flip.
2. Money is made in the purchase, not the sale.
This sounds counter intuitive, but house flippers make their money when they buy the house. This obviously does not mean that the flipper literally gets paid, but this is how to make the most money from a flip. Buy the right property at the right price. Be careful not to jump on the first cheap house you come across. Warren Buffet once said, “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” Pay attention to market ebbs and flows (3.75 years up, nine months down).
3. Spend your money in the bathroom and kitchen.
One of the secrets to flipping houses is that the best places to spend your money when you’re going to fix and flip houses is in the bathrooms and the kitchens. These are rooms that need to have quality and updated appliances for people to actually want to buy them, and they can be pretty pricey. Pinch your pennies elsewhere and make sure that you give these rooms the attention and updates they need. Your ROI will thank you.
Do you have any other tips for rookie house flippers? Let us know in the comments.