The residential real estate market is booming all over the world, with prospective home buyers looking to find the diamond in the ruff that will serve their family for decades to come. Needless to say, picking up houses, restoring them to their former glory, and selling them for an elevated profit is a lucrative business venture in the modern era.
While the premise itself might seem simple and straightforward, the industry is actually quite a nuanced and complex one. The tiniest of mistakes can end up costing you thousands of dollars, or worse, your business license. On the other hand, if you execute the following steps properly, you can expect to ensure an affluent future in few years’ time. Here is the essential guide on how to start a house flipping business.
You will need a sound business plan
The business plan is the foundation of every entrepreneurial venture, no matter the industry, no matter the niche. In order to ensure a steady climb to success in the following months and years, you will want to establish realistic short-term, mid-term, and long-term goals, along with a sound marketing strategy, a pool of possible funding sources, and a list of prospective team members.
A good business plan can only bear fruit if executed with passion, determination, and unyielding resolve, especially during the first stages of your journey. Most importantly, a business plan will allow you to put a realistic risk management strategy in place, detailing the numerous problems that may arise along the way, with their possible solutions.
Learn the ins and outs of the industry
The pen is mightier than the sword, or in your case, the information you obtain about the industry, from approaching investors to selecting and reviving a house, will prove to be imperative for your success. Rather than testing your luck or going into business with limited resources, you want to do your research, and educate yourself about the ins and outs of the trade.
You can start by visiting popular forums and participating in discussions detailing everything a beginner needs to know. Get in touch with people who have been in the game longer, and ask about scouting properties, making offers, getting in touch with investors, refurbishing homes for maximum ROI, and obtain the names of trustworthy professionals for your team.
Surround yourself with a winning team
House flipping is not a one-person job. You will need a team of people working with you on building a reputable, successful business. The first person you want to hire is an attorney, as they will be instrumental in drawing up contracts and making sure your business is abiding by the local laws and regulations.
You will also need an accountant, to keep track of your finances and help you set up a business structure. Another crucial member of your team is your agent. A good practice is to look at the Australian market, where house flippers make it a priority to contact a reputable property buyer’s agent in Sydney and other promising real estate areas in order to acquire a property for the best possible price.
Remember, if you are buying, you are bound to encounter an experienced real estate agent who will attempt to make a sale at a substantial profit, so make sure you meet this challenge with a professional help of your own. Complete your team with a trustworthy general contractor who will oversee every reconstruction.
Ensure reliable financing sources
Investing your own money into your business venture is not the only way you can delve into the house flipping world and achieve success. Assuming that you will need outside funding, you want to consider the numerous funding opportunities and how to approach them.
The first option is obtaining a hard money loan. The benefits are faster approval rates and more lenient qualification requirements than you would face with traditional loans, but they are usually burdened by higher interest rates.
Your second option is the rehab loan which lets you fix up another home, depending on the lender. They are accompanied by more competitive interests. You can also acquire investment group loans from investors interested in funding your project. Another option is to obtain a small business credit card, which is accompanied by fast approval and processing times while usually offering numerous other advantages.
Find the right properties and whip them into shape
Finally, you can start scouting for properties. You can begin by considering several crucial factors that can ultimately determine the outcome of your investment. Consider the neighborhood and its aesthetic appeal, paying close attention to the valuable amenities in proximity to the property that can elevate its price. These can be schools, parks, supermarkets, sport centers, etc.
Assess the average selling prices in the neighborhood so that you can tailor your starting offer, and try to focus on homes that require minimal investment in the beginning. This means finding houses without any structural issues, sinking floors or foundation damage. Later on, you can start buying more demanding properties and invest more money in their revival.
Congratulations, you are ready to sell your first house. After following these steps, the final thing to do is to execute your marketing strategy and find prospective buyers. With these essential insights in mind, you will have no problem starting up a successful house flipping business.
You may also be interested in: Why Curb Appeal is Important to Selling Your Home
Writer: Cooper Klien
Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.