Low mortgage interest rates, coupled with news headlines proclaiming a seller's market has succeeded in encouraging many new investors to begin looking for their first investment property. While flipping a house can certainly be profitable, it can also carry serious financial risks, especially to those who are new to the process. If you are a new investor with plans to flip a house, doing the following four things will help you avoid costly mistakes and enjoy greater success.
Start with a viable budget
Financial risk must be managed carefully to make money when flipping a home. For the new investor, this means having a viable budget for each phase of the project, including:
- the initial purchase
- repairs and renovations
- marketing and selling of the completed home
To make a profit on the entire project, investors must make sure that each phase of the project is completed without pulling money away from the other phases.
Choose the right location
Flipping a house successfully requires being able to attract a qualified buyer, once the home has been renovated and readied for the market. In order to do this, new investors will need to make sure that the home they purchase to flip is located in an area where there is strong buyer interest in a renovated home.
Excellent neighborhoods to consider are those that offer reasonable security, nearby employment opportunities, and good school systems. In addition, investors will want to be sure that the number of vacant homes is low and that occupied homes are well-maintained. Looking for these qualities can help new investors be sure that the area is one in which property values will remain stable or rise, helping to protect the value of any home they own in the area.
Hire the right contractors
Keeping costs as low as possible and making sure the project is completed on time are important goals for every new investor. To accomplish these goals, new investors must be careful to hire the right contractors.
Instead of focusing only on the bid amount to determine which contractor to hire, new investors should also be sure to obtain and check references, and require copies of any applicable licenses, permits, bonds, or insurance.
Rely on the right real estate professional
Opting to work with the right real estate professional offers the new investor an opportunity to benefit from their knowledge. An agent with a successful record of assisting investors will be able to help new ones find the right home to purchase, as well as offering guidance throughout the process of renovating and selling it.
Contact local real estate agents for more information and assistance.