House flipping is an investment practice or strategy used within the real estate industry that involves buying an asset with the intent to sell it for profit immediately thereafter. The process also includes renovating properties and selling them at a higher price. While house flipping generates revenues and gains for property investors, this could result in losses if you are not aware of the risks. What investors need is a property valuable enough to be sold for more than what was initially spent.
In the current market, it is a challenge to make profitable housing flips. But what makes a successful house flipper? Why are they able to pull off a sale where others cannot? Below we list down the traits that may have led to their investment victories and set them apart from a crowd of investors:
They always say that your flipping journey is half-way done if you buy at the right price. According to an expert, profit does not happen only after you sell a home for a certain price. It happens the moment you decide to buy the property. Even if you purchased the property at a favourable price, spending thousands of dollars for renovation and improvements would have been too costly to make a profit. Smart purchase decisions, as well as knowing when to seize an opportunity when it presents itself, play a key role in the future success of any flipping venture.
House flipping is a "high risk, high rewards'' type of investment. For you to generate more profit, you need quick access to cash. Traditional lenders may require a 25% down payment yet offer the best prices. There are lenders, on one hand, who prioritise an asset's value over your credit history. They will not hesitate to lend you money for purchasing and rehabilitating the investment property, but interest rates could be higher. Successful house flippers are steps ahead of the rest and can tap into various sources, so that there is enough cash on hand before they even begin the flipping process.
It is always important to know how much you are likely to spend on a house, including repair and marketing costs. You also need to anticipate possible losses and have a fallback plan in case your flipping strategy does not work. Seasoned investors set up a clear timetable before proceeding with a flip. When making cost estimates, make sure to cover all angles besides the per-square-metre price of the target property. Consider labour, equipment and material costs on top of your home insurance, property taxes, mortgage, commissions (if any) and advertising expenses.
Reputable contractors with a proven track record who can also give you a good price are few and far between. That is why you need to find one first before you start house flipping. Read reviews online, ask people within your sphere of influence for references, or consult a buyer's agent. Compare prices and sit down with contractors to discuss your plans and budget. Whoever meets you half-way and offers flexible arrangements, put them at the top of your priority list.
Inexpensive homes do not always make for a good flip. Some investors are under the impression that just because they purchased a house at a very low price, the flip will surely be successful. But the key to flipping success goes beyond low-priced homes. Buyers would rather want to live in safe locations with great potential. Properties in good neighbourhoods have rising values and you can sell them at a high price sometime in the future.
Another overlooked trait of model house flippers is that they do the groundwork themselves. If you can do the repairs, renovations and marketing on your own, then this would be a more cost-efficient option than hiring a contractor. If you think you have enough valuable time to spare, then a hands-on approach may work to your advantage. When in doubt, however, always leave it to the experts.
Looking for your next profitable investment property in Canberra? Get in touch with our team of buyers advocates for an in-depth consultation.
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