What to Consider Before Your First House Flip

Flipping a house is an exciting project. You’ll not only feel a thrill when breathing new life into an unloved property, but you’ll likely be eager to generate a superb return on your investment.

However, the steps you take before and during the process will determine how healthy your bank balance is once the project is over. You must avoid various common mistakes along the way to lower your stress levels and boost your finances. Here’s what to consider before your first house flip.

Your Source of Funding

Your source of funding will determine your mortgage eligibility, house flipping timeline, and the renovation process. Many people might apply for a mortgage from a traditional bank, but the application process can be time-consuming. Also, you’re more likely to be denied a mortgage if you have a poor credit history.

For this reason, many new and established house flippers often turn to hard cash money lenders to fund one or more projects. The short-term loan is secured against an asset, such as real estate, and provides funding to purchase a property and execute various renovations. It will provide quick access to the money you need to buy a house, and you don’t need a perfect credit score to apply. Once you’ve sold the property, you can repay the loan in full.

The Neighborhood

A property’s location can shape its value. Savvy flippers tend to research up-and-coming neighborhoods to invest in properties that will likely provide an excellent return on investment.

For instance, you may want to purchase a house or apartment where a new highway is being built or has increased access to public transportation or new schools, daycare centers, restaurants, or stores.

Attend many open houses to determine the quality of local competition, too. Also, find out if property price reductions are common in the neighborhood to identify how fast houses sell and how it may impact your return on investment.

The Timeline

The longer you own a property, the more it will cost you. For this reason, you mustn’t own the property a month longer than necessary, as you must follow a strict timeline once you receive the keys to the address.

If you’re new to house flipping, give yourself 12-18 months to renovate and sell the property. However, more experienced house flippers will likely complete a flip within 3 to 12 months.

It may help to split the house-flipping process into the following four stages:

• Stage 1 (1-2 months) – Finding and buying a property
• Stage 2 (2-6 months) – The renovation process
• Stage 3 (1-3 months) – Marketing the property
• Stage 4 (1-2 months) – Selling the property to a buyer

The Return on Investment

Last but not least is your return on investment. Your goal might be to give an unloved property some TLC, but fixing structural problems often yields bigger results than cosmetic changes. It is smarter to address essential repairs, such as plumbing or electrical issues, over changing countertops or replacing doors. Also, invest money into improving a property’s curb appeal to boost its value, such as installing new windows, improving the lawn, or paving a driveway.