Before we dive into the meat of this article, let’s start by explaining what is meant by flipping homes. Generally, the term “flipping” is a word used to describe the buying of a revenue-generating asset, a house in this case, and reselling (or flipping) it for profit. Specifically, in the real estate industry, this term describes something known as “residential redevelopment”, and typically applies to homes that are distressed or abandoned—AKA properties that are run down in nature. While a lot of research is necessary to avoid losing money in the process, if done correctly, you’ll find that flipping homes is a very lucrative business!
Do your research
When it comes to jumpstarting your house flipping career, it’s essential you do some preliminary research first. Even though this step seems tedious, it is crucial in ensuring that your potential investments are as risk-free as possible. Here are some factors to dig deep on:
According to Fortune in 2016, house flippers saw gross profits of 80% or more in the following cities: East Stroudsburg, Pennsylvania (212.1%), Reading, Pennsylvania (136.4%), Pittsburg, Pennsylvania (126.8%), Flint, Michigan (105.8%), New Haven, Connecticut (104.8%), Philadelphia, Pennsylvania (103.7%), New Orleans, Louisiana (97.6%), Cincinnati, Ohio (88.5%), Buffalo, New York (85.1%), Cleveland, Ohio (83.8%), Jacksonville, Florida (81.8%), and Baltimore, Maryland (80.8%). As for markets to stay away from, these cities have low inventory and high demand, so flippers are paying above-market prices for these houses and drastically reducing their net profit: San Antonio, Austin, Salt Lake City, Naples, Dallas, and San Jose.
· Learn your market
Research the local market. Where do people want to live the most right now? Are people flocking to buy a house in Miami, for example? What type of house do people want to buy right now? Beyond that, not every market is good for flipping houses. If you have $20,000 to work with, you probably don’t want to begin your house flipping career with homes starting at $800,000. Tools offered by sites such as beycome.com are useful for looking at market analytics for an extensive database of properties.
Additionally, according to Than Merrill, star of A&E’s Flip This House,
“You also need to be mindful of the bigger picture. Taxes, school systems, employment and convenience, play a major factor for end buyers. This would mean buying in a town with low taxes or increased employment opportunities.”
Evaluate your finances
Before making any significant investment decisions, it’s imperative that you evaluate your finances so you know how much you can realistically afford, and be able to plan your budget accordingly. Make sure to pay attention to these critical factors:
· Your credit score
Even though it’s certainly possible to find financers and flip a home without the best credit, its way harder, and you may have to deal with sub-optimal loan terms. Typically, a good credit score (700+) will secure you ideal, small business loans that’ll save you the most money over time.
· Your cash flow
Will you have any type of income source while fixing and flipping homes? Or are you working with a stagnant, limited pool of cash? Knowing your cash flow will help you determine the loan type, loan amount, and terms that you’ll need to complete your projects.
Finding the right home to flip
This part can be particularly difficult and requires the most oversight, mainly because selecting a house in which the cost of repairs far outweigh the home’s earning potential can be a terrible misstep and drain your pocket in the process. So what are the types of homes you generally want to stay away from? Here are a few:
· Avoid unique homes
You know that multi-coloured house out in the woods, inspired by Picasso’s The Charnel House? It’s a great price because nobody wants it. Even if you paint it over and redo the kitchen, this doesn’t change the plain fact. Fun fact—the boring, cookie-cutter homes out in the suburbs? Those have been proven time and time again that they can sell. Typically stick with those.
· The home built before the late 70s
Not only will you have to deal with repair issues that are a colossal pain, but you’ll also have to handle the problem of lead paint as well. And the process for that? Hiring a firm certified underneath the EPA’s Lead Renovation, Repair and Painting Program to take care of it for you. Trust me; it’s not worth the headache.
· Homes on a busy main road
If you don’t want your children playing in a yard facing a busy street, it isn’t likely other parents would either. You’ll lose out on a large chunk of potential customers by going down this avenue, and young families are a group you’d definitely want to keep in the loop still.
· Homes in a bad area
If crime runs rampant, the houses surrounding it are dilapidated and not due for any upcoming renovations, or wild animals are a threat (or even a combination of all three!), it’s in your best interest to avoid purchasing a home here. No matter how cheaply you price the property, you’ll find that very few people would want to move in there.
How technology is being integrated with flipping
Now you have a home to renovate and flip! We can finally get to the core of this article: how to use technology to flip homes? Smart homes. While implementing a whole house system ears on the more expensive side, there are cheap ways to increase the house your flipping’s appeal without breaking the bank. Incorporating technology into your homes can help you appeal to a broader audience and certainly sell your home faster.
· Home automation kits
Following the same vein as smart lights, home automation kits let buyers to control almost all their electronics—even when they’re not at home. So you forgot to switch off the stove? No problem! Switch it off while on the way to work. The best part is that you don’t even have to buy smart appliances for this to work.
· Smart lighting
Installing a LED lighting system, or any other smart lighting system requires minimal effort, as well as expense, but provides many rewards! Smart lights allow homeowners to control their lights through the use of a smartphone, placing them in control even when they’re not at home. This is a pretty sweet selling point for potential buyers you’re trying to sell to.
· Techie Outlets
There are plenty of gadgets that rely on a USB cord, and yet there are so many outlets that don’t provide this support! This leads to users often having to invest in bulky adaptors to charge their electronics. Luckily for you, the investor, these outlets are affordable to purchase and will definitely influence tech-reliant customers.
· Energy-efficient fixtures
Protecting the atmosphere is a good thing, and there’s a growing number of Millennials and Generation Y-ers that care deeply about this. Advertising energy-efficient fixtures like low-flow toilets will be a great way to capture this ever-expanding market.