Flipping a house is a rewarding process. It essentially involves purchasing a house and later selling it in the same calendar year. According to CNBC, house flipping is becoming a financial opportunity worth exploring. The average profit on a house flip in 2015 is $72,450, which represents the highest profit since 2011.
House flipping can encompass many plans of action, with the most common being purchasing a home in desperate need of repairs. Once that work is complete, you then sell it and hopefully, turn a profit.
Before you start remodeling your new purchase, keep in mind some essential rules of house flipping.
The neighborhood is important
Not too many buyers are going to want to purchase a newly renovated home if the surrounding neighborhood is declining or doesn't offer much. The neighborhood is just as important to selling a home as is the property.
Some neighborhoods may already be established, whereas others can be classified as up and coming. In either instance, knowing the market will help you find the right home to flip while also giving you an idea of the profit margin.
You may even find it beneficial to renovate the house, rent it out for a few years and then sell it once the neighborhood has become a popular attraction.
Big rehabs aren't bad
Many home that are flipped will typically undergo renovations and in the most extreme situations, total rehabs. While all that work may seem daunting, Trulia stated a big rehab project shouldn't be looked at with fear.
Instead, embrace it. Homes that require a lot of work can typically be purchased for relatively low prices. Use this to your advantage and form good relationships with contractors to ensure the price you pay for the rehab doesn't cut into your eventual profit.
When it comes to actually fixing up the house, stay on top of the latest trends that add a timeless look to the property.
That being said, you want to watch your budget when it comes to remodeling the house, and this goes back to understanding the neighborhood. You don't want end up with a house that is the most expensive on the block, and therefore will go unsold. The neighborhood should help influence your decisions when it comes to rehabbing the property.
Furthermore, keep your buyer in mind, recommended CNBC. If you're remodeling a home in a neighborhood with good schools, the buyer will likely be family. You'll then want to ensure there is an open family room and more than one bathroom. You also can't forget to clean up the backyard.
Market and stage
In an age of widespread social media usage, online marketing will help you spread the word on the flipped house. You can even market to sellers. Most importantly, marketing will help with leads and sales.
Once the house is ready for a showing, consider using a professional staging service to help the selling process. Since this is a home you've flipped, there won't be any furniture or accessories that can help sellers envision themselves in that house. Professional staging will change that.
Disclose all information
Make a list and document everything that was replaced. Pictures are helpful to help identify the new windows, for instance. If you ended up replacing important components of the home, such as the HVAC system or heating, be sure to schedule a home inspection service to look at everything to ensure nothing is wrong. You can then present this information to the buyer.
Flipping a house requires dedication and plenty of research to ensure high profit return margins. Some essential rules of house flipping will guide you through the entire process.