The art of the flip renovation
There is such an abundance of television programs that show you how to flip houses, you’d think everyone in the free world would be house flipping by now. But realistically, it ain’t for everybody. And more to the point, deciding if flipping houses is right for you by simply viewing television shows on the subject is akin to thinking you can learn how to play piano by just listening to a great concert pianist. Obviously, not gonna happen.
Devotion to house flipping
Having a true passion and devotion to the flipping process is integral in doing it correctly, and more importantly, making a profit at it. You’ll first need to ascertain whether you have the time and inclination towards flipping. In addition, ask yourself if you have the stomach for the risks involved in such an undertaking. If you’re paying all cash for a property to flip, you’ll be tying up a huge amount in investment with no leverage. And that’s even before you put more into the project in renovation costs…sometimes renovation costs are double, triple and even quadruple acquisition base costs for the property.
Keep in mind that if you take on a mortgage for a house flipping project, you’ll be taking on a large amount of extra closing costs. And those costs will be paid back in (hopefully) a short period of time when you place the house on the market again, fully renovated. A quick turnover is great. But keep in mind the financing costs are magnified when paying the mortgage off in a short period of time. I’m a big proponent of using other people’s money for leverage. Just be sure you’ve researched the lowest cost alternatives for a short-term financing goal.
Basic questions to ask
Will you be doing the work yourself, or hiring a crew of tradespeople to oversee? Or, will you hire (at a premium) a full contractor who will be in charge of hiring subcontractors to perform the necessary renovations. Do you have any design sense to pull off a large scale renovation? Most beginning property investors leaning how to flip houses will certainly make mistakes early on. Mistakes like not understanding the need to design and renovate with as little of your emotional self as possible. Learning that an investment property is not a home, and certainly not a vanity project. Renovating a downtrodden house just so you can be proud of how it looks after you’re done does not a profitable property investor make.
Your first foray into house flipping
The first time project in house flipping is the most important. It’s where you’ll make your costliest, most egregious mistakes. But if you have the passion, and have allowed a wide berth of a financial cushion for yourself. When buying the property (by purchasing a house substantially below market value, for example), you’ll have a canvas on which to paint your first property investment masterpiece. Even if it ends up looking like a pre-school exercise in finger painting. Just consider it a great learning experience. Then move on to the next project with lessons learned from experience.
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