Flipping homes is a lucrative business that, if done right, can net you tens of thousands of dollars for just one home! In fact, according to ATTOM, for the second quarter of 2018, the average house flip profit averaged around $65,520—but, before you can become a successful home flipper, you’ll want to know the ins and outs of what it takes to maximize your net profit.
The bottom line of rehabbing and making money off of the sale of a flipped home is to minimize costs without sacrificing quality or amenities. You don’t want to rehab a home using cheap products or sloppy work, as this can have an impact on the home’s value.
Keep reading to learn about 6 effective ways to increase your profits when completing your next flipped home renovation.
1. Find Homes That Sell Quickly
One of the most important house flipping tips is finding the right home. Location is everything when flipping homes. When choosing your next property to buy, flip, and resell, you want to choose the one that’s in a popular area. Look at recent home sales and ensure that homes are selling in the area.
Other details to consider before purchasing is the home’s surroundings. Take some time to read about the community that the home is located in. How is the school district rated? Are the crime rates low? Is there nearby shopping and entertainment? These are all factors that prospective home buyers consider when finding their perfect home.
You’ll also want to pay close attention to the average salary in the area. This gives you a price range for which you can expect to list the home for when renovations are completed.
While you may be able to cheaply purchase a home, make sure that the sale price of the home once it’s listed on the market fits the average home buyer’s price range. If you complete a home renovation and then price the home well above the average cost in the area, it will take much longer to sell. It’s best to find a home that you can flip and re-sell quickly. This starts with pricing the home right.
Lastly, when choosing your next home to rehab, avoid those that aren’t ideally located. The fact is that not many people are looking to live in the boonies off of a dirt road. You’ll also want to steer clear of mobile homes, as well as homes that have been damaged by floods or fire. Historic homes can also be problematic, as they likely have mandated preservation requirements that can limit your remodeling freedom and creativity.
2. Properly Estimate Expenses
Knowing how to get started flipping houses starts by having a clear idea of how much home repairs will cost. This is one of the most common errors that home flippers make. From installing a new roof or HVAC system to cosmetic enhancements like new lighting fixtures, a fresh coat of paint, and new interior glass doors, you’ll want to be as accurate as possible when estimating these costs.
The biggest problem occurs when you underestimate home renovation costs. If you spend more than projected, your profit will be lower. If you overestimate costs, you may take out too large of a loan (and pay interest on that borrowed money), or you may inflate the real value of the home, which could drive home buyers away.
While estimates are just that, it pays to be as precise as possible. So, how can you estimate costs correctly? Take the time to check home improvement stores to get an average cost of materials. You can also network with current suppliers to see if they can give you a competitive price.
3. Choose Worthwhile Upgrades
Not all home upgrades will provide a high return on investment. Before rehabbing a home, make sure you know which projects are most likely to make you money and which ones need to be done, but aren’t going to produce a lot of profit.
Home upgrades with a high return on investment include:
- Landscaping and improving the home’s exterior
- Kitchen renovations
- Bathroom renovations
- A fresh coat of paint
- New appliances
You may also find profit in installing modern interior sliding doors. Glass sliding doors are ideal for any home, though in smaller homes these doors add an open airy feel that can make a small space look (and feel!) much bigger.
You’ll want to avoid upgrades that are done out of personal preference. While you may love the idea of an in-ground pool or a hot tub, these upgrades do not increase the home’s value and don’t appeal to all home buyers.
To increase your home flipping profits, only take on rehab projects that add value and improve curbside appeal. A home remodeled wisely is more likely to bring in profit.
4. Use Cash as Often as Possible
While there are specific loans for flipping houses, you’ll get the most bang for your buck by using cash to pay for a majority (or all) of your renovation costs. Loans, such as home equity lines of credit or even a second mortgage, all have costs associated with them. Not only will you have to pay loan origination fees, you’ll also be on the hook to pay interest rates, points, and other fees. These all reduce your net profit and should be avoided when possible.
By paying in cash, you don’t have to worry about fees, interest rates, and other costs that chip away at your bottom line profit.
5. Don’t Wait to Start Home Renovation Projects
Nothing minimizes profit more than a house that goes months before the rehab project begins. In the house flipping industry, time is money, and the faster you flip the home and get it back on the market, the better off your profits will be.
As a rule of thumb, you’ll want to start rehabbing immediately Once closing is complete and the home is yours to renovate, don’t wait! Devote as many hours as possible to complete the work. The quicker the home is ready for new owners and put on the market, the sooner it will sell. The quicker a home sells, the higher your profit margin will be.
6. Pay All Closing Costs
Once you’ve completed a home renovation and the house is listed on the market, be prepared to pay the buyers’ closing cost. The fact is that most home buyers don’t have the funds needed to cover closing costs. In fact, most lack the money for the traditional 20% down payment.
By offering to pay the buyers’ closing costs, the home is more likely to sell for a higher price and sell much faster.
The Sliding Door Company Makes a Home More Modern
Installing new doors inside of a home can have a drastic impact on the overall look and ambiance of the space. If you’re planning a renovation in the near future, consider having modern interior sliding doors installed. These doors are great for letting in more natural light while also offering privacy by using frosted or smoked glass.
Sliding doors are for much more than entering and exiting. They can be used to separate a large open room into several smaller spaces. They also offer privacy.
For all of your glass door needs, look no further than The Sliding Door Company. We specialize in sliding glass doors and offer a wide range of designs. You can even customize the doors to achieve the look and feel you desire.
Schedule a consultation online to learn more about our products and how they can fit into your soon-to-be flipped home.