How to Make a Fix and Flip Worth Your Time
Do you enjoy watching HGTV? Think you could do a better job flipping houses? The housing market is hot right now in many cities throughout the U.S., and homeowners who have sold recently have gotten top dollar for their properties. If you want in on the action, it may be the right time to consider a fix and flip.
Fix and Flip Loans for Beginners
Fix and flip loans are short-term loans that allow you to purchase a house, fix it up, then "flip" it for a quick profit. You can typically pay back the loan with the profits that you make from the sale. Any leftover funds are yours to keep!
Keep in mind, homes purchased as flips are often distressed properties. They may be bank foreclosures or short sales, so buyer beware! You should have a good knowledge of real estate trends in your area before you invest in a property as a flip. Ideally, you're looking for a property in a desirable location that needs some updates. Cosmetic improvements can take a house from "no thanks" to "oh yeah" in a short amount of time.
Many beginner flippers prefer to use a good general contractor or handyman, but if you've got a bit of DIY know-how, you can probably handle some renovations yourself. Cutting costs by taking on some of the labor can save you a lot of money – as long as you know what you're doing! Make sure not to bite off more than you can chew. Paying a professional to fix your mistakes is a costly error that can take a bite out of your profits.
Securing Your Loan
Fix and flip loans differ from regular mortgages because of the quick turnaround. Your lender may offer you a bridge loan, which offers quick access to the money you will need to complete your renovations. The loan is secured with your real estate assets.
To be approved for the best fix and flip loans, you'll want to be able to show the bank that you've considered all the angles. Having a plan that details the estimated costs of the renovation can show a lender that you're prepared. A good credit score and income history are helpful assets to have when applying for a fix and flip loan.
What should I renovate?
They say kitchens and bathrooms sell houses, so those are two major areas to consider for renovations. You may want to focus on new kitchen cabinetry or countertops for your fixer upper. Minor updates can have a major impact in the bathroom as well, so consider replacing old vanities or swapping out dated silver faucets for trendy gold ones.
Your upgrades could include the following items, as your budget allows:
- New countertops
- New cabinetry, or refacing existing cabinetry
- New tile backsplash
- Updated appliances
- New bathroom fixtures
- New bathroom lighting
- Fresh coat of paint
To get started, check comparable listings in the area to see what features are being highlighted in desirable homes. Consider how you can incorporate some of those desirable elements into your house, even if it's on a shoestring budget. Also, don't underestimate curb appeal! Every realtor knows that first impressions matter a lot, so make sure to tend to the outside of the property as well. Find more renovation tips
As long as you do your research and make a solid plan for your project, flipping homes is a great way to bring in a little extra income. Who knows, you may find you have a knack for it – watch out, HGTV!