What You Need To Know Before You Start Flipping Houses

Nearly every other show on HGTV is about flipping houses. It’s easy to see why the idea of this business appeal to people. If you have an eye for design, are tired of working a nine-to-five job, and want to improve your lifestyle, this career path might be for you. However, there are a few things to know before you start flipping houses.

Location, Location, Location

Location matters. It doesn’t matter if you flip the most beautiful home your potential buyers have seen; if it is in an unsafe or undesirable area, they won’t buy it. Plus, the location can bring down property value, meaning you won’t make as much money on the sale. If you want to choose the right home to flip, you would first research a property’s surrounding neighborhood.

How Much To Spend

When first starting out, it can be tough to know how much money you should spend when flipping houses. This is where the 70 percent rule comes in!

The 70 percent rule informs you of how much of your budget you should invest in a potential investment property. When considering investing in a home, you should only pay 70 percent of the after-repair value (ARV) of the property, minus the cost of any repairs. The after-repair value of a home is its property value after renovation.

For example, say the ARV of a home is 300,000 dollars, and the home needs 50,000 dollars of repairs. 70 percent of 300,000 dollars is 210,000 dollars. Subtract the 50,000 dollars of needed repairs from this amount. In this case, you would have 160,000 dollars in your budget and should avoid spending more than that on a flip project property. One thing to avoid when looking for a house to flip is choosing an expensive property that requires even more costly repairs, as these factors limit profitability.

Where To Focus Your Energy

Another thing to know before you start flipping houses is that some home renovations are simply more valuable than others. Know which renovations to focus your time, energy, and budget on. Start by repairing any problems that could be dangerous for future inhabitants. Some crucial repairs you may make include replacing rotten floorboards and fixing faulty wiring. After addressing any safety issues, focus on making the most valuable renovations. These are the renovations that make the most impact. For example, a home with a newly renovated kitchen and outdated bedrooms will sell faster than a home with an old kitchen and a modern bedroom.