How to Flip a House With No Experience
Flipping houses has never had so much popularity. 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.
However, if you’ve never flipped a house before, the process can seem overwhelming. Flipping houses is relatively simple, but it requires proper planning, funding, and time investment to get right.
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. You’ll have to spend some time looking into the local market and specific neighborhoods before proceeding. When finding the right area, it’s usually best to avoid the higher-end neighborhoods.
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
Before you even begin looking at properties, you should get your financing in order with cash or a pre-approved loan.
Established investors often use the profit from one home flip to purchase the next home. However, if you’re just starting out, 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. If not, talk to your lender and see what else you can do to qualify for an investment mortgage.
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 cash to buy this one.
Regardless of your loan approval amount, decide on your budget, allow for contingency spend, and stick to it as best as possible. Make sure it is an amount you can reasonably pay each month, not just what the lender thinks you can pay.
Learn more about how to fund a home renovation.
3. Find & Buy a House
Once your financing has been approved, you and your realtor can begin looking at homes. Make sure you choose a realtor with experience in investment properties.
The best person for the job should know the local market well enough to suggest neighborhoods with better returns on investments. Your real estate agent should also be able to help you assess whether a property is a good match for you and your goals.
Because investment properties tend to be in disrepair, your home inspection is crucial. You need to have extensive knowledge of everything that needs to be replaced or repaired. This will help you decide whether the property fits 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. Just keep in mind that your final budget may change when you start choosing materials, such as cabinets or flooring.
4. Repair & Renovate
Finally, the fun part! If you’ve been watching HGTV, you are no doubt familiar with the concept of “demo day.” But, of course, the actual renovation will be much more complicated.
Before starting to renovate, 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 prior to purchase.
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
In addition, you may want to do additional 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 other tasks that require more manual labor than skilled knowledge.
For the things you can’t do, talk to a general contractor for a quote. They can give you an estimate for the rest of the repairs. If the numbers they give you go past your budget, you have to prioritize or bump up your budget.
Remember, don’t over-renovate. Keep in mind the size of the home, its location, and the homes around it. You may not get your money back 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, since those buyers have very specific requirements.
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, you should work with a realtor with 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% and 6% of the home price
You also want to make sure that you recoup the money you paid each month for the mortgage, including the interest rate.
Flipping houses is an excellent way to turn a profit, even with no experience. The most important things you can do before flipping a property is 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.
If you’re interested in flipping houses in Philadelphia or San Diego, Brotherly Love Real Estate are your local property experts. We buy and sell houses fast in the local area, and have tons of knowledge on real estate investing.