Real estate and the study and practice of flipping houses is one of the most fascinating and challenging projects in equal measure. Often, once an individual or a couple flips their first property, the thrill (not to mention the potential profit) they experience can encourage them to immediately seek out their second – and can even be a catalyst to a career in real estate.
Here, for your information and, of course, reading pleasure, is a beginner’s guide to flipping your first property.
Determine a Strict Budget
The first and arguably the most important step to flipping your first property is to determine a specific budget with as many resources at your disposal, adding up the estimated total cost.
Every choice you make after you have decided and set your budget, be that a little choice or a large decision, always needs to be made with your final budget in mind, and this means you will have to compromise on at least a few components and elements.
There is a particular art to budgeting for your first property flip, but the following tips should help you determine your final number:
- First, decide upon the absolute maximum amount you are willing to risk losing on the flip
- Divide your budget plan into selling costs, house purchase costs, cushion, and upgrades
- Speak with a reputable and trusted real estate agent
- Always include a full house inspection within your initial budget
Learn About ARV
ARV, which stands for After Repair Value, is crucial to be aware of before you even start work on the property, and is essentially the projection of how much money you may get when you sell the property once all the renovations and changes are complete.
The ARV model also demonstrates the seventy percent rule, which means that any investor should be looking to pay approximately seventy percent of the ARV of the property, minus any repairs that are needed. For example, if you are looking to invest in a property that costs $200,000, you should be prepared to pay around $50,000 in renovations and repairs.
How to Find Your First House to Flip
Generally, especially for beginners and first-time house flippers, it is advisable to choose a home in a more affluent neighborhood. This means that once your desired changes have been enacted, the house will be up to standard and will benefit from being in a desirable location.
Additionally, another good shout is a property that is structurally sound and has no real issues in terms of the foundations, walls, and awnings but is aesthetically unattractive, meaning you only need to make superficial changes once you purchase the house. Furthermore, whilst working on the home, you should contact a reputable and established local storage supplier, such as storagearea.com, to have a place to store any furniture within the property that you want to keep but does not fit in with the design aesthetic of this home.
Follow these tips and you can make a bigger profit from flipping houses.