The real estate industry provides investors with an opportunity to make profitable income while their clients get the best business space and accommodation services. Unlike in the past, the real estate industry nowadays involves more than buying and selling houses. For investors, the real estate industry’s avenue cannot be compared to other business sectors.
A trend has been noticed in the real estate industry in the recent past and is becoming more attractive and profitable. The house flipping business. Does it sound familiar to you? If yes, then you know what it involves. If not, here is what the house flipping business means.
House flipping is when a real estate investor buys a house and later sells it for a profit. The investor should make his intention clear that after buying the house, it will quickly be resold. In most cases, the time between buying the house and reselling is a couple of months, and the maximum time is a year. With the clear path created under the real estate industry, a lot of individuals are considering starting up a house flipping business. But what does it involve? What are the essentials to note before immersing yourself in the business? What are the benefits of investing in the business?
Benefits of Investing in House Flipping Business
Unlike other businesses, flipping houses doesn’t call for full-time attention. This means that you can balance between your day job and flipping houses without feeling exhausted and pressured. Working part-time also increases the chances of making extra money and handling your financial needs with ease.
The fact that you will be working part-time also allows you to weigh your options, see where the house flipped gig lies, and its relevance as an income source.
Did you know that you can comfortably flip houses at the comfort of your home? Starting up can be hectic, but the fact that you will be working solo allows you to work where it is comfortable. As much as renting a storefront or a physical office is vital, that will come later when you consider starting up a house flipping business. The flexibility that comes with the venture helps you lower the operation cost while making profits in the process.
You are the boss
House flipping business allows you to run as a solopreneur until or unless you want to add more help. Investing in house flipping creates the path you need for self-employment. You get the freedom to set your working hours, work anywhere, take vacations and do what you love without interference. However, it is crucial to note that being your boss means holding the burden of accountability and responsibility for the business’s success and failures.
Low startup costs
In many businesses, the startup cost is always high. This is because one has to build or rent a storefront, buy inventory or equipment and purchase franchise licenses. The startup capital is among the crucial tips for entrepreneurs to consider before making an investment decision. Flipping houses, on the other hand, requires a relatively small amount of capital to startup. Did you know you can even flip houses with no money?
No degrees or licenses
Yes, it true. Starting up a house flipping business doesn’t require you to have any special degree or licenses to make a mark in the market. You should, however, have a specific set of skills, special mindset, and spirit to survive in a competitive work environment.
Having experience in real estate or construction comes in handy in getting the best from your efforts. The construction experience you have is vital in property flipping as several home remodeling services should be done to make the house viable for reselling. You should be able to delegate tasks, focus on the business areas that you enjoy most and have an influential mark on your customers.
Business growth and development
You should be ready to make mistakes, fail and experience hardships when you consider starting up a house flipping business. However, this process gives you an opportunity to learn, gain new skills and experience, and grow at a personal level. House flipping business will help you learn the basics of starting, managing, and owning a business. It will be easier to understand and manage the business’s different aspects, including human resources and project management.
When you start up a house flipping business, you also gain invaluable construction experience that helps you grow and develop as an entrepreneur. The fact that you will be overseeing the rehab process of the flip project means that understanding how bathroom renovation and mold remediation is done will be easier. Effective business growth and development gives you confidence and courage to take your house flipping venture to the next level and exactly where you want it to be.
Steps to Starting a House Flipping Business
It is important to think critically before starting up a house flipping business by noting specific and relevant factors. The knowledge you have about the house flipping business will determine to a larger extent how far you will go with the venture. Below are the steps to note and which will help you achieve your objectives.
Create a business plan
Having a business plan is the first step to take. This will not only kickstart your business journey but also help you make informed decisions. It is important to note that, like other legitimate businesses in today’s market, starting up a house flipping business calls for a realistic business plan. Creating a business plan should be among the first steps that you take as an investor. When looking to flip properties, having a business plan comes in handy as far as its implementation is concerned. However, a house flipping business plan doesn’t work well with a single house but rather multiple properties. The benefit of having a business plan is that it will guide you as an investor through the flipping process throughout your career. So how does a business plan help in starting up a house flipping business?
- As an investor, you maintain a level that is conducive to a successful business.
- Proves how serious you are as an investor about starting the flipping business.
- Help share your vision with others and especially potential business partners.
- Help find a lender to borrow from and support your dream easily.
- Help identify individual’s strengths and weaknesses and how to overcome them in the business.
It is crucial that your business plan clearly outlines the projected budget, the market, the basic timelines, and most importantly, the type of properties you plan to flip.
Find and secure funds
Setting up the business means considering all the steps involved in a business establishment. Having a bank account is among the crucial steps to take before starting up a house flipping business. But until now, your bank account is as empty as it can be. The next step to take is finding and securing funds. But how do you go about the process? You should note that this is a common hurdle for house flippers and should be jumped above successfully to go to the next level. It is sporadic for individuals to start and fund their business, so lenders’ availability comes up as a bonus. You can consider applying for fix and flip loans as they are explicitly provided for individuals who seek to invest in house flipping projects.
Raising money to finance your house flipping business also means that you critically consider your options. The source of funding you select should be in relation to your time in business, your goals, and your credit history. As much as they might be helpful as you start your business, securing loans can prove a burden as time goes by. This is because you will be needed to purchase properties, cover construction equipment rental and operating costs and pay for renovations.
Work with professional contractors
It is paramount that you establish a relationship, connect and work with contractors and other professionals when starting up a house flipping business. This is important as the services they provide will help contribute to your business’s progress and success. The moment you start planning to get hands-on with your properties’ renovation, the contractors should be at your disposal.
Most properties that you will be flipping as an investor are in distress. The team of contractors you will have helping out with the construction and remodeling work should possess specific skills and knowledge. You need the contractors’ skills to identify and install luxury stone and tile in the house, help install a new air conditioning system, recommend and install the best windows in the market and replace them with the best roofing materials.
Consider asking for references and checking through the portfolio of the contractor before hiring the services offered. When you are starting up a house flipping business, you should develop a stable working relationship with a top-rated contractor as this will help raise your score and get hard money loans from lenders and investors. The other professional to include in your team is a real estate agent. The real estate agent comes in handy in listing and marketing the flipped property.
Maximize On Market Research
Knowing and understanding your market is crucial for any startup business. This is not different when starting up a house flipping business. Researching helps you understand the best property to buy and how to make it attractive and place it for reselling. The decision you make before engaging in the house flipping business should be concerning the amount of research done. You should note that buying the wrong property reduces the chances of making a profit from the house flipping process.
As far as market research is concerned, you should be critical of the professionals you work with. It is helpful to have a reputable realtor as it will be easier to know and understand the market. With the knowledge, skills, and experience that realtors have, finding the hottest neighborhoods that house flipping businesses will thrive becomes easier. The realtor also helps get information on houses sold recently, the market price, and other relevant data to your business. You should take advantage of the information provided by realtors in starting up a housing flipping business.
Complete your first house flip
After setting up your business, connecting with a team of professionals, securing funds, understanding the market and the selling price, the next step is picking a property, buy it, renovate and flip it for a profit. This is a crucial step and which should primarily involve your team of professionals. The realtor should help you gather information on the available properties before you hit the market. The relevant paperwork needed to buy and flip a house should be handled with the realtor or an attorney.
The renovation processes should be effectively completed before the house is put on sale in the market. The asset’s value should be assessed by the realtor and put on a list for potential buyers. It is important at this point to work with an attorney once a buyer is interested in the house. The profit you get from the house is any amount that exceeds what you have put in buying, renovating, and listing it.
A successful house flip will encourage you to invest and venture into the business and enjoy the related benefits. Focusing on the stated steps as a first-timer will build your confidence when starting up a house flipping business and catapult you to the highest levels.
Mistakes to Avoid Before Flipping a House
As much as starting a house flipping business can be lucrative in the long run, there are some common mistakes that you should avoid as an investor.
The renovation and flipping process is time-consuming as it can take months to find the right buyer. You need to weigh your options and the amount of time you have up your sleeves before starting up a house flipping business.
Knowledge and skill levels
If you lack the right knowledge and skills, you should think twice before engaging in a house flipping business. It is, however, crucial to outsource such skills when need be.
Any productive investment calls for money to be used. As much as securing loans can work for you, you must assess your financial capabilities before starting up a house flipping business. This is vital as you need to start the process and complete it without financial struggles.
The house flipping process calls for patience. If this is a virtue that you lack as an investor, you should consider engaging in other business ventures. You need to be as patient as possible to make the house flipping business a success.