The principle behind home flipping is pretty simple: find a house, refurbish it, and put it back on the market for a profit. While the principle is easy to understand, however, getting there is not as easy as it seems. It’s not as tough as some make it out to be though; it’s about being savvy with which type of properties you invest in and how to keep costs to a minimum without sacrificing quality. Here are a few tips for maximising your profits when flipping properties.
Take Advantage of Online Suppliers
When it comes to construction supplies, a lot of people will automatically turn to their local builders merchant. But it often pays to look online as well, especially when it comes to timber.
You have providers like Armstrong Supplies, for instance, that will allow you to get timber supplies at the fraction of the cost you would have to pay at a local store. They’re a specialised business, which means that they not only have greater purchasing power but more variety as well. This also means that you won’t have to go round the houses to find the exact type of wood that you need and get everything you need all in one place.
Make Sure That You Have a Well-Stocked War Chest
Another thing you have to do is make sure that you start with enough capital and credit. Flipping property demands a lot of resources; maybe more than what you have at the moment. Some costs can also spiral out of control, which is why you need to have good cash reserves in case something comes up.
Having great credit is also essential in this business. This first means that you have to actually know what your credit score is in the first place. You’re entitled to a free annual copy of your report from the three major credit agencies, TransUnion, Equifax, and Experian. This also means that you have to build relationships with lenders and nurture them. Having a good relationship with one or a few banks could open you up to better loans with better rates. It will also make the application process much easier and will reduce the chance for last-minute issues.
Don’t Have Tunnel Vision
Don’t just consider houses or properties located in the city. While it might be a good option for a beginner, you will need to start expanding your horizons. Maybe you could start looking at commercial lots or undeveloped land, or maybe you could turn a profit by demolishing a derelict property and developing top of it. When you look at the options, you can see the many different ways you could profit, so don’t limit yourself.
Inspect the Neighbourhood
Don’t be fooled by a seemingly good deal. The neighbourhood is just as important as the actual property, if not more. You don’t want to go to an area that is in decline. You also don’t want to fall for stereotypes when picking locations.
Some areas that you may have thought were out of the question could be on the rise, and these are often where some of the best opportunities can be found. This means that you have to look not only at current statistics, but in which direction they’re heading.
Another thing you have to understand is that there is a limit to what you can do to a property to increase its value. You can do whatever you want to make your house more attractive, but it won’t rise that much above what the average house in the area goes for. Even average house prices can be tricky since uncharacteristically high selling houses can throw the number off.
It’s better to look at the median price instead so you can get an idea of how much houses in the middle of the pack tend to sell for. This will give you a better idea of what type of prices you can realistically aim for in this area.
There are many reasons why starting small is a better idea. The most obvious one is the cost. You have less to spend and less to lose. You can start learning about the process and the paperwork. Entry-level flats with entry-level prices are usually a good bet. Try to pick areas and properties that cater to small to medium families.
Another great reason to start with a small property is that you could actually use it to build leverage. Having a fully or partially paid for property could allow you to gain leverage from equity or use it as an asset to get more financing.
These are just some of the ways that you can maximise your return on investment when flipping properties. The more you learn, the more refined your strategy will be. So, make sure that you take baby steps at first and consider more sophisticated investments as you move on.