Home fix and flips can provide you with a lucrative income. It’s understandable that you’d want to flip your first house.
But flipping for profit takes time, work, coordination, and, most importantly, money.
Fortunately, hard money lenders can help you get started the right way with their flexible qualifications and short approval times.
You’ll be out the door and onto your first flip in no time. But before you venture into your first fix and flip, answer these 7 questions to help you prepare.
1. How will I find a property?
Flipping is a competitive market in most areas. You’ll have to be strategic about how you find your deals.
It’s not as simple as searching online, so you should have more than one source to buy property.
Experienced flippers know to look in the right places for deals. Divorce and probate courts are one source to find qualified houses. They also manage estates and unsettled debts on properties when someone dies.
What’s your loan scenario?
Check out public auctions featuring foreclosed properties. These are where you can find good deals but you’ll need to move quick.
You get what you see with foreclosed properties, so think whether this is in a high-demand location and you can flip quickly.
2. How will I purchase properties?
This part can be tricky for new flippers — in a competitive market, cash offers buy properties.
You don’t have time to sit around and wait for approval from a traditional mortgage lender.
But with a hard money lender, you can get approval for a cash loan in 7-10 days.
A private lender, such as Marquee Funding Group in California and Colorado, offers loan amounts from $50,000 to $20 million, with same-day approvals.
A hard money lender will need to hear your loan scenario though — what you plan to do with the property and how you plan to repay the loan. If it makes sense, they’ll work with you.
Hard money lenders are in the business of building relationships with their borrowers. Consistent successful deals will entice a lender to continue working with you.
The sooner you can get cash in hand, the quicker you can flip your first house.
3. Do I need to inspect these properties before flipping?
This might seem like a step that will only add more costs but you don’t want to be deep into renovations before you find a major area that needs repairing.
Let your inspector know that you plan to flip this house, so they’ll only focus on getting areas up to code to sell.
You should know what you’re getting into before you close the deal.
Also keep in mind that different agencies that sell properties, usually foreclosed properties, may or may not allow inspections. Tax foreclosed homes are always sold sight unseen. Others may allow a property to be inspected first but you’ll need to pay the fees.
4. Which renovations will add value?
Once you’ve determined how to get everything up to code, then you can think about which fixes will attract buyers.
For this reason, aesthetic updates are a common focus. But remember that you want to keep costs low to maximize your profit, so don’t decorate as if it’s your own house.
Bathrooms and kitchens are always at the top of buyers’ minds when a new home and will likely bring you the most return on the cost of their renovations.
Other things that will freshen up a house, and are easy enough to do yourself, include:
- Replacing light fixtures
- Installing new outlet plates
- Replacing doorknobs
- Powerwashing and/or painting the exterior
- Replacing doors
- Putting up new backsplashes
5. What is the market like?
The housing market and your location’s specific market will both factor into the success of your first flip house.
It’s best to buy in locations that are up-and-coming instead of the one you know is hot right now. You won’t get a deal in places where the demand is already high, making the asking prices high too.
Take into account what the real estate market looks like as a whole too. Is it a buyer’s market or a seller’s? What are rates like right now? This will help you develop a better flipping strategy so that you can get the house to sell.
You can research market conditions yourself or use a real estate agent to find the best properties for your purpose, in the current market.
6. How important is the selling price?
Obviously, you want to sell the property for more than you put into it and more than you purchased it for. But your profit will be determined by your own purchase price.
The goal of flippers is to buy already undervalued properties so that a small number of renovations will allow the house to appraise for much higher than you paid.
A selling price means nothing if you have to spend a lot to get it or put a lot into it to get it ready to sell. The sales price is also limited, to a degree, since the home will be priced comparable to other homes in the neighborhood.
There’s a limit to what buyers in that area are willing to pay, so it’s your job to set yourself up for success at your own time of purchase, rather than when the project is finished.
7. What is the best timeline for a project?
The short answer? A quick one. But also a realistic one.
If you’re stuck on one project for too long, then you’re capping the amount of money you can make. These projects should be turned over quickly so that you can move on to the next deal and increase your profits.
However, you want the job done right. You’re usually working with contractors at some point and you can’t fully control their timeline.
If you’re doing a lot of the work yourself, make sure to add in enough realistic wiggle room in your projections, to account for things going wrong.
When you’re ready to start investing, fixing, and flipping, Marquee Funding Group wants to help. Whether you’re new to the game or have some experience, submit your loan scenario to see if we can get you financing.