Flipping property has become one of the most popular side hustles and a way people have found to start working for themselves and take control of their financial future.
But what is property flipping? How does it work? These questions will be answered in this guide, and maybe you will soon be a property magnate, flipping houses for a profit across town.
How It Works
In short, property flipping is buying a home and then selling it again quickly for a profit. Usually, the shorter the time you own the property, the better, as holding on to it means you are paying taxes or mortgage payments that will eat into your profit.
It sounds complicated, but with the right planning and proper financial preparation, it becomes routine. You do not need a lot of capital to get started either, though it helps; knowledge is the real power here. The more information you have about an area and the demand for houses there, the better chance you have of flipping a property for a profit.
Take Myrtle Beach, South Carolina, as an example. There is a constant demand for houses in that area as residential homes and for use as vacation houses. Homes for sale here often creep up in value, peaking before summer.
If you look for a real estate agent at Myrtle Beach you can find a range of homes that would be perfect for a family or as a vacation getaway. With EZ Home Search, you can find properties and real estate agents across North Carolina and South Carolina.
You can make money in an area like this because of the excess demand for vacation properties, and if you did have to hold on to a home for a while, you could rent it out to tourists to cover your expenses.
The Benefits Of House Flipping
By far the biggest benefit to flipping property is the profit you can make. It is why people do it in the first place. The money that can be made from each house is potentially tens of thousands in a few months.
This is all if everything goes very well of course, and house prices spike during your brief period of ownership. With careful planning, you can avoid losses to protect profits even if you must keep hold of a property for a while before the sale. Short-term renting with services like Airbnb is an option for some, as is becoming a landlord for six or twelve months to cover costs while house prices rise.
Flipping homes can quickly become a full-time occupation too and provide the income you need to work for yourself and gain complete financial independence. Even as a side hustle, flipping homes can be profitable enough to pay for luxury vacations, cars, or paying your own mortgage off early. Many people will also use house flipping to build a retirement fund or to pay for their kid’s college tuition.
It can also be a way to diversify your investments if you already have built up a fund. The returns available in the housing market can often out-perform other investments like stock market shares or savings accounts.
The housing market is much more stable than the stock market. By switching some of your investment funds to house flipping you can get a better return on investment and minimize risk to your overall portfolio.
The Pitfalls Of Property Flipping
Sometimes things do not go to plan, just like with any other endeavor. Most of the big problems can be avoided with plenty of research, planning, and discipline.
The biggest problem people experience is getting carried away and over-stretching their resources and themselves with too many properties. Slow and steady, that is the way. Remember that you cannot buy time and there is only so much that you can dedicate to house flipping. If you stay disciplined, you will have a lot of fun while you make a profit.
People who fail to research the area they are looking at, and the types of houses that are in demand, will often find themselves holding on to houses too long and cutting down their return. Research is key, and data is king.
This goes for the individual houses themselves too. Without fully inspecting a home, and planning any renovations or interior design work, you could find yourself with a house that needs a lot of time, money, and attention to get you a profit.
The best home for a quick flip does not need any alteration or redecoration and can be put back on the market almost immediately for a higher price; this is more common than you might think.
How To Start Flipping
Your priority should be to organize your financing. This should start with your personal finances, as your creditworthiness will be assessed if you need to lend any money to start flipping.
When you have an idea of how much money you will have access to, both your own and from lenders, you will need to budget for your first home. Do not expect to spend the full amount on the property though. There will be expenses to pay and problems along the road. Your project will need some cash on hand, and your budget should reflect this.
With a house price in mind, you need to identify your market. This can be local to you but does not have to be. You can buy and sell houses anywhere you want, but you are going to need to be in the area to find your properties and tend to the paperwork; factor in transport costs to your budget.
The market you work in should be in demand, you need to sell the house to someone as quickly as you can. The house you are looking for will be in an area with a steadily increasing average property value. Doing this ensures you should be able to break even, including expenses if house prices plateau suddenly.
The key to getting a good return, sometimes 5-10% of the property value in just a few short months, is to buy before a big development begins in the area. Whether a new large employer that will push demand for houses as workers look for local homes or an entertainment and retail complex that brings a new convenience; investment in the surrounding area increases house value.
How To Profit Consistently
If you do plenty of research and have a disciplined approach, you should not struggle to turn a profit on house flipping. By keeping within your financial limitations, and choosing a property with plenty of potential, you can slowly begin scaling up your business. Too much too soon has brought many properties flippers’ success to a halt.
Be realistic about time scales, and factor in the cost. You can hold a property for one month, three months, or six without a loss if you plan for it. You may need time to make some profitable alterations and additions to the home, but remember time is money and will increase your outgoings. This could make some renovations too costly despite the value they add to a home.
Research, discipline, and planning can help anyone achieve success with property flipping. Follow the tips in this guide, stick to your budget and your plan, and you can become a property magnate in no time.