When it comes to making money in real estate, not all real estate investors want to become landlords and build their wealth by collecting monthly rents. Fixing and flipping real estate is an alternative investment strategy that has been attracting more and more investors. In this article, we will show you everything you need to know on how to flip real estate.
Real Estate Flipping: Definition
Before talking about how to flip real estate, it is important to define it and distinguish its different types. Real estate flipping, or fix and flip, is a short term real estate investment strategy that refers to purchasing a property with the intent of selling it quickly for profit rather than holding it for a long time.
In real estate terminology, flipping is usually divided into two types. The first type is when a real estate investor targets property in highly appreciating markets, where he/she would buy cheap real estate assets then resell with no additional investment in the property. This type of flipping requires good knowledge of the market conditions and the ability to measure and predict real estate market trends.
The second type of house flipping, and the one we are more interested in here, is fixing and flipping real estate. A fix and flip investment is when a real estate investor locates a distressed property that is listed below market value. Then the investor renovates it and sells it for a profit. It looks easy, right? Well, it’s not as easy as it looks on TV. House flipping is a tricky business and if you don’t know what you are doing, you could lose your investment. But don’t worry, we are here to give you the tips you need to learn how to flip real estate like the pros.
Want more info on how to flip real estate and make money? Read this blog.
How to Flip Real Estate Like a Pro: Locate the Right Property
How to flip real estate rule #1: Find the right location.
You probably know by now that the most important factor in real estate investing is the location of the investment property. When it comes to flipping real estate, this is no different. Therefore, finding the right neighborhood for a fix and flip investment should be your priority.
Neighborhood analysis is the process of evaluating how good a neighborhood is for buying an investment property. Avoid investing in low-income neighborhoods as these are often associated with high crime rates. On the contrary, look for neighborhoods in cities with clear growth indications like employment growth and a thriving real estate market. To help you locate the best real estate investments efficiently, Mashvisor’s investment property calculator provides you with neighborhood analysis for hundreds of cities and towns around the US.
When looking for a fixer upper property, make sure that the market you are looking in is a seller’s market and not a buyer’s one. By definition, a seller’s market is one where months of supply (how many months would the current inventory of homes sell) is less than 6 months. Conducting real estate market research can you help identify whether a market favors sellers or buyers.
How to Flip Real Estate Like a Pro: Build Your Team
If you ask how to flip real estate like a pro, I’ll tell you that a major success factor in flipping real estate is building a strong network of professionals to work with. These real estate professionals will help you identify and perform the required renovations. The following list includes the most important people you need to include in your network.
1- A general contractor
Finding a general contractor that can do most of the rehabilitation work is important to save money on the renovation works. Sometimes a distressed property will require different specialized contractors to do the job. If you are seriously considering flipping properties, then start looking for reliable contractors.
2- A home inspector
If you don’t have enough experience in fixing and flipping properties, then you need a home inspector that can help you find out how much work is required. This is important to estimate the costs of rehabilitating the investment property.
3- A real estate agent
You can never go wrong with a real estate agent by your side. However, if you have access to real estate investment analysis tools like a property finder and an investment property calculator, you might find you’re able to work alone. Lucky for you, Mashvisor provides both.
Financing Flipping Houses: What Options Do You Have?
When it comes to flipping real estate, it is important to know your finances. How much will renovations cost? What is the after repair value? How to finance the flip? The following financing options are what you need to learn how to flip real estate like the pros.
1- Traditional banks: Conventional mortgages are the first thing you think of when looking for options to finance a flip. However, banks are often reluctant to finance flipping investments because they are considered risky investments.
2- Hard money lenders: Taking a private money loan to finance a house flip is another option. But you should know that hard money loans come with high interest rates and fees. Nevertheless, hard money lenders can be your only option if you want to finance a flip with little to no money.
3- FHA 203K loans: These loans are used to finance property improvement projects. Since 203K loans are guaranteed by the Federal Housing Authority (FHA) lenders take less risk and as a result, are likely to approve. Keep in mind, you’ll have to live in the property for a year to qualify for this loan.
Now that you know how to flip real estate like the pros, it is time to get out there and start looking for your next flipping property. Mashvisor can help you locate the best real estate investments using our unique data analytics.
To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.