If you’ve watched a home and garden lifestyle channel over the last few years, you’ve probably noticed a trend. Buying a house to renovate or repair, or in some cases completely overhaul, to then sell at a tidy profit is all the rage. After seeing the fortunes made by the reality stars on their television screens, more and more investors are thinking they can make a quick buck too. What those programs often don’t show, however, are all the things you need to know and need to do in order to successfully and properly flip a house, such as negotiating prices and vacant home insurance. You can’t simply decide one day to start investing in properties without the proper background. Here are some things to know about flipping a house.
Do Your Research
We’d all love to make money sitting at home surfing the web, but you can’t flip houses like that. You have to hit the pavement and research things for yourself. That means going to potential investment properties and seeing them yourself. You’ll need to talk to insurance companies about the right insurance for investors. You’ll also want to see the sale value of other homes in the neighborhoods and cities in which you might invest, to see where you might get the best return on investment. Like any investment, you do not want to go in blind.
Do The Math
Often at the end of those shows, they put up a graphic showing the amount the home was purchased for, the amount it cost to improve, and the amount sold, with the profit shown at the end and highlighted in bold letters. This quick and dirty math is not the full equation when planning a flip. You must also take into account property taxes while you own the home, insurance for investors, and leave room in your math for any unforeseen disasters that might present themselves when work starts on the home. You should also use several sources when attempting to estimate the potential resale value of the home after it’s repaired.
Many house flippers have found themselves in deep financial trouble after something has gone wrong with a project and they didn’t have the right protection in place. Many standard home insurance plans do not cover empty homes that are being renovated for flipping or renting. Vacant home insurance will cover your empty property against most potential hazards so that you won’t be left holding the bag if the unthinkable happens. If you happen to have several properties on the go at once, you can get vacant home insurance to cover all of them under one policy. Don’t get caught without some much needed protection.
Stage the House
It’s important to make the home look presentable when you go to resell it. That means bringing in furniture and other accessories to make it look fabulous and to show off its potential. You certainly don’t want to pay to furnish a house that you plan to sell, so find a rental company and bring in rental furniture for showings and open houses. This cost should also be factored in when you’re doing the math on how much the cost of the flip will be. We often don’t think of where the furniture has come from when we’re watching those house-flipping programs.
House flipping is a growing trend partly because of television, but also because it can work, as long as you have your ducks in a row.