How to Flip a House With No Experience

Flipping houses is my jam. We at Brotherly Love Real Estate buy homes for cash and then flip them for profit. There’s a ton of background work that goes into flipping houses. Thanks to home improvement shows and YouTube tutorials, investors and DIY-ers are turning to house flipping for a reliable (and fun!) source of additional income.

Back when I started the business with Jon without any experience in house flipping, I wondered, “If we would ever be as successful as those guys.” And 10 years later, we are thriving.

If you’re thinking about flipping a property, keep reading to learn how to flip a house with no experience.

1. Research the Market

Not every market lends itself to flipping houses. Research is essential and a timesaver. My advice would be to study the market before you initiate.

Even an investment property in a high-end neighborhood will be more than you want to spend. Plus, luxury buyers are very particular about what they want. You’ll have to pay extra for top-grade materials and finishings, such as molding, fixtures, and so on.

Therefore, to widen your buying pool, it’s best to choose a good area with family buyers or millennial buyers, and choose a property that is generally considered desirable to most people.

2. Figure Out Financing

As with buying properties, get your finances in order. An all-cash offer or a pre-approved loan would be useful.

In my experience, “Established investors often use the profit from one home flip to purchase the next home. However, if you’re starting, paying cash is probably not an option. In that case, you can usually apply for an investment loan.”

An investment property loan is similar to a mortgage, but there are some differences. Plus, qualifications are usually stricter, including things like the following:

– 620+ credit score
– 20% down payment
– 6 months of reserves for mortgage payments
– Strong work history, typically two years of W-2s

If you meet these financial requirements, you may qualify for a traditional home loan.

Provided you can scrape together the funds yourself, then you’ll have the negotiating power that comes with being a cash house buyer. Even if you don’t have the cash sitting around, but have equity in another property, you can refinance that property and use the funds to purchase.

Regardless of your loan approval amount, decide on your budget, allow for contingency spend, and stick to it as best as possible.

3. Find & Buy a House

Once your financing has been approved, you and your realtor can begin looking at homes. A realtor with experience in investment properties would be helpful. Your real estate agent should also be able to help you assess whether a property is a good match for you and your goals.

Since investment properties are generally in a derelict state, a home inspection is essential. This helps assess if the property is worth the money and inside your budget. Have a general contractor walk through the house with you. They can give you a rough estimate of the costs involved in the renovation.

4. Repair & Renovate

Finally, the fun part! If you’ve been watching HGTV, you are no doubt familiar with the concept of “demo day.” The actual renovation will be much more complicated.

Before starting renovations, figure out exactly what needs to be done. You should have a good idea of the basics and what needs to be repaired from the home inspection.

You should be prepared to fix anything that is:

– Broken or not working – such as showers that don’t drain quickly.
– Outdated and dangerous – such as wiring that isn’t up to code.
– Missing – such as kitchen faucets.

You may want renovations for aesthetic purposes. Beyond just painting, which is a given in most house flips, you may want to replace flooring, change cabinets, add crown molding, and so on.

Before you get started on anything, decide which of the projects you can do yourself — the so-called “sweat equity.” Even if you aren’t an avid DIYer, you can probably paint, pull up carpeting, and perform other tasks that require more manual labor than skilled knowledge.

Remember, DON’T OVER RENOVATE. Keep in mind the size of the home, its location, and the homes around it. You may not get a return on investment if you install top-of-the-line materials in a starter home in a modest neighborhood. Those buyers simply aren’t willing to pay that much more. Likewise, installing cheap laminate flooring in an upscale area will make the home more difficult to sell.

5. Sell for a Profit

Once you have completed your renovations and passed any necessary inspections, it’s time to put the house back on the market.

Once again, work with a realtor who has experience in investment properties. They will know how to market your home to highlight the work you’ve done and any new features that you may have added.

A realtor can also help you set a price that will reward you for your work. You want to ensure that all of the costs of the renovation are included in your final asking price. When you are doing your calculations, don’t forget to include:

– Money paid to contractors.
– Money spent on materials and material delivery fees.
– Your time and effort spent working in the home.
– Realtor commissions – as the seller, you are responsible for paying commissions, typically between 5% to 6% of the home price.

Summary

The most important things you can do before flipping a property are to ensure you plan accordingly and budget well.

When renovating a property, there’s always room for things to go wrong. Having a contingency plan and spare funds are the best ways to ensure you still get a good return on investment after flipping.

Remember, before buying a property to flip, it’s a good idea to speak to a real estate agent. Ask for advice on which type of property you should buy and what the buying market is like for such properties after renovation.

And as always, for any advice or questions, reach out to your friendly neighborhood cash home buyers.