How To Succeed In Flipping Houses

Last updated 6th August 2019 • Lois ArcariJaeVee

Property, Strategy, Flipping

Flipping houses is often seen as the perfect short term strategy to increase your capital quickly. But it’s far from foolproof - with prices, structural issues and more all to watch out for.

Our handy guide will equip you with all you need to know to make this strategy a success.

Why flip?

Flipping is a great way of generating profit without having it spread out over the long term.

PLUS you don’t have to deal with tenants.

It’s also seen as one of the best ways to get extensive experience covering many aspects of property.

You’ll get the chance to

  • Learn the ins and outs of construction
  • Get insights into buyers
  • Learn how to budget around unexpected costs and roll with the punches
  • Increase your contacts
  • Take pride as your vision becomes a reality

With the relatively short term turnaround, it’s also an excellent way of sourcing profits to go BACK into your business for financing your longer term projects.

How to source your properties

Price is always the first thing you’ll need to keep in mind when you’re buying the house you want to flip.

You’ll have to find creative ways to buy as cheaply as you can, whilst making sure that the property still offers good quality, and won’t cost you more than it’s worth in repairs.

To increase your capital enough to make the profit you deserve, you’ll need to make sure you’re buying something with real value, and that you’ll add real value onto it too.

As with any property, you need to buy in a popular area with all the standard amenities and transport links.

BUT with this strategy more than any other, it’s important that you choose somewhere relatively local.

Flipping houses isn’t something you can do in a hands off manner.

You’ll need to get as stuck in as possible.

Not only is it the best way to get the most experience out of your development, you will also have a better chance of avoiding any nasty structural surprises or setbacks.

Paying attention to the buyer profile of your area is wise.

While you should certainly design your property to have mass appeal, looking at the demographics of buyers in your area will give you a definite heads up for creating a property that will quickly bring in profit.

So, once you’ve done all the necessary research on what you need from your property, what will you need to do when it comes down to buying?

Buying on market

Agent

Buying through an agent is usually the easiest process you can take- but the ease comes at a price. The properties being sold here are public knowledge, so you’ll have to battle it out with a high level of competition.

You’ll also need to avoid the high street, which will only give you the most basic deals.

To get an idea of the deals that are definitely worth it, you’ll need to create great relationships with your estate agents. Ideally, you’ll want them to approach you rather than you having to approach them.

Auction

Buying at auction is a great way to get great deals with a little bit less competition.

Going to auction in general is a good strategy, but you can also take advantage of the periods before and after the auction itself. You can even try and snap something out as soon as you see the auction brochure.

It’s an equally smart strategy to check up on the properties that haven’t managed to sell.

They won’t all be duds - sometimes they’ll be good investments that just haven’t performed on a bad day. The owners of these properties will usually be happy to get them off their hands, and also may be prepared to undersell as a result.

Buying off market

A better option could be to look at off market leads.

These won’t be listed with agents or even online, as they’ll prefer to deal with their buyers one on one.

The only drawback is that it’s often a slower process to find them.

Here’s what you should generally look out for:

  • Repossessed houses
  • Probate property
  • Absentee owners
  • Properties from ex-landlords who want to move on from the business.

So, how do you contact such private sellers?

Since they won’t advertise themselves, you’ll need to try out the direct approach.

  • Send direct mail to viable properties, or try telephone marketing
  • Set aside some cash for general marketing purposes, so that you’re well known enough that those sellers will want to contact you with their deals
  • If you want a bit of extra help, you could try using a buyer’s agent. They can be pricey, and even the source of scams if you’re not careful, but these can provide you with a quicker service due to their expertise at building client relationships

However you decide to buy your property, you should look for properties that you can get up to mid value, with 3 beds usually offering the greatest diversity of buyers.

Oh, and of course, you should only decide based on your budget.

You should only ever buy if you’ve double checked your budget and expenses, you expect to see a 20% return on your investment.

This is the figure that matters because it will still allow you to get along relatively comfortably if your property takes a while to get off market.

In that vein, you should also make sure that you’d be comfortable with renting out your property short term, just in case there’s any cooling in the market.

Financing

Flipping is one strategy where you have to be extremely careful with your financing.

There’s quite a lot to keep in mind here.

You can’t try to apply for any type of mortgages. If you do, not only will you be turned down because they’re not meant to be used for short term investments, but you could also be blacklisted.

Bridging finance is one of your options.

You’ll have a good chunk of your investment paid off upfront, anywhere from 50%-100%.

You then pay off your interest in monthly chunks.

It’s a good way to secure the property fast, if you’ve got any competition from other investors - but it is quite pricey and can eat into your profit.

The best way to check that this option will still leave you in profit is if you overplan how long you’ll have to pay it off, and base all your estimates from that.

You could also look into combining your finances within a joint venture. While this is a great way to get the finance you need and build strong relationships for your business, you’ll also need to prove that you’ve got a good range of experience and a good track record.

If you don’t, no reputable partner will want to work with you.

Cash Buying.

If you are lucky enough to have it lying around, these type of properties often benefit from a cash buyer.

You won’t have to pay any interest, which means a greater profit margin. And it prevents any debt based panic - there'll be more of a basis to wait out a slow market, and won’t be tempted to sell it cheaply in a rush.

When you look at the house

When you’re taking a look at the houses you want to flip, it might be hard to see any particular problems, but that doesn’t mean that the property is in perfect condition.

It can be hard to spot the problems underneath the surface, like problems with electrical wiring, or plumbing, with an untrained eye.

That’s why you’ll need to get builders to come in and take a look at the property before you make an offer, so you know if there’s any structural problems before you buy.

What you need to know

You’ll need to decide how you’re going to manage the refurb early on.

Using a project manager.

They’ll oversee the development to make sure everything’s going smoothly and to time, as well as control most of the planning of the project.

While these will help coordinate your project and make sure you can sell it on time, they’re also another member of the team who will cost to take on.

Go it alone.

This can definitely seem like the more intimidating option, and we have to be honest with you, certain things could go wrong. You may be more likely to get the budgeting wrong and incur more costs, or the project might run over for longer.

But there is a point to making these mistakes.

They’ll provide you with valuable learning opportunities and give you some essential experience.

Once you’ve chosen who will manage the refurb, you’ll need to get your timing right.

You’ll have to buy materials and complete phases at the right time,as well as keeping your build as close to schedule as possible, otherwise you could see a rapid downturn on your profits.

Lastly, it's time to figure in the one essential cost that isn’t so easily measured.

Think about how much stress you can work with constructively in the process of flipping, and ways to keep your cool when things get even more stressful.

If you’re working every hour of the day to keep your build going smoothly, then your real income hour by hour won’t be any different from what you could earn from any other part time job. And any undue stress will compromise the quality of your project as your concentration falters.

Once you’re ready to sell

You have to remember that your selling strategy is equally as important as the quality of your refurbishment. You need to make sure the photography isn’t just industry standard, but is actually exceptional - you want your photographs to link your property with an aspirational lifestyle - people don’t just buy a house, they buy the life they see living in.

The work to sell your property should start months before it’s on the market.

If you’re using an agent you should ask them about layout and fixtures while the project is still in development so that you’re already primed for market and don’t spend your money unnecessarily.

It’s one of the most obvious things that we can tell you, but people still keep on making this mistake!

You need to make sure the decor is nice and bright and neutral.

It needs to be a blank slate for your potential buyers so that they can see themselves living there.

You don’t need to make your mark - you won’t be the one who’s living there. You need to ensure that you have simple but elegant interior design with unfussy dressing.

Lastly, you’ll need to price your development within reason.

Greed won’t get you anywhere.

The property can't be over valued because of the blood, sweat and tears that were poured into it

Over pricing will just end up giving months of loss on your property - and it’s better to have a more modest profit, than mega profits only in your imagination.

In Conclusion

To get through the grind of flipping and come out with great profits at the other side, you’ll need to make sure you’ve got the necessary attitude to keep on going.

While researching what can get you good ROIs is important, it’s taking decisive action that really matters.

That’s why the experts recommend diving straight in and getting to grips on the job. You’ll need to be positive about your strategy so that you can stick to the game without getting burnt out.

Be self motivated and prepared to make short term sacrifices to get long term rewards.

You’ll need to get clever with your money, but don’t be so cocky as to think you’ll make millions overnight. Resilience will pay off with this strategy, as it does with everything in profit.

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