Flipping houses is the process of buying a property, typically at a discounted price, and then renovating and reselling it for a profit. It has become a popular way for investors to make money in the real estate market here in Austin, Texas, but it does come with risks and challenges.
Finding the right property
The first step in flipping houses is finding the right property. This often involves looking for properties that are undervalued or in need of repairs. Investors can find these types of properties by searching for foreclosures, short sales, or properties that have been on the market for a long time. In his book, “Rich Dad, Poor Dad”, Robert Kiyosaki recounts that he would regularly go on walks throughout a neighborhood in which he wished to acquire rental properties. Simply by striking up conversations with folks, he was able to land an excellent off-market deal. Get creative!
Determining the scope of the work
Once a property has been found, the investor will need to conduct a thorough inspection to determine the scope of the repairs that will be needed. This will include an assessment of the condition of the roof, foundation, electrical and plumbing systems, and any other structural or cosmetic issues. Once the repairs have been identified, the investor will need to create a budget and a timeline for the renovation project. This will involve hiring contractors, ordering materials, and coordinating the work schedule. Many well seasoned investors who we have worked with will just call us to perform a preliminary walk through; even before they’ve purchased. Once you have a contractor you trust, you can circumvent much of the work here by paying for their time to get a professional opinion and even, possibly, a ball park estimate for the overall repairs needed.
Finding the right contractor for your flip
Finding a good contractor is a crucial step in the process of flipping houses. A good contractor will not only be able to complete the renovation work to a high standard, but they will also be able to work within the budget and timeline that has been set. As a side note, this is another good reason to have your contractor walk the house with you early in the process.
One way to find a good contractor is to ask for recommendations from other investors or real estate agents who have experience with flipping houses. They may be able to provide the contact information of contractors that they have used in the past and trust.
When interviewing potential contractors, it’s important to ask for references from previous customers and to request to see examples of their work. This will allow you to get a sense of their experience and the quality of their work.
In addition to the cost of the renovation work, it’s also important to discuss the payment schedule with the contractor. This will ensure that the renovation work is completed on time and to your satisfaction. It may take some time and effort to find the right contractor, but it will be worth it in the long run to ensure that your flips turn out to be profitable.
Marketing, Listing, and selling
As the renovation work is being completed, the investor will need to market the property to potential buyers. This can be done through online listings, open houses, and other forms of advertising. Some flippers we have worked with in Austin, Texas get very creative with this. We’ve seen open houses with bouncy houses, popcorn machines, live music, you name it. It’s also great to do a walk through video that includes you actually walking through the house and hyping it up. This will be more attention grabbing than a generic walkthrough.
Finally, when a buyer is found and the sale is complete, the investor will need to pay any outstanding debts and taxes, as well as calculate their profit.
Flipping houses can be a lucrative business, but it does come with risks and challenges. Investors need to be prepared to put in the time, effort, and money required to successfully renovate and resell a property. It’s also important to be aware of the local market conditions and the legal requirements related to flipping houses. With the right approach, flipping houses can be a great way to make money in the real estate market.