If you’ve watched any of the popular HGTV shows about flipping homes, you’ve likely considered whether you might be able to make some money buying fixer-uppers and making them into something desirable to home buyers. Certainly, flipping homes has a lot of appeal. You get to be your own boss. You can realize a big payment if you choose the right property and are careful about what you spend on improvements. And, you’re unlikely to get bored at your job.
However, flipping homes has a big financial risk associated with it. If you choose the wrong home, or if you can’t flip it quickly enough, your big moneymaker can become a financial drain. To make sure you understand all that’s involved with flipping homes before you make an offer on that distressed property, we’ve outlined the major steps in the flipping process.
Flipping 101: The Process
1. Securing your financing
In today’s market, you need to act quickly. Sellers, even of fixer-uppers, are no longer willing to wait weeks for you to get your financing lined up. If you’re not in a position to pay cash for the property (and why do you want to tie up your liquid assets when you may need them to buy renovation supplies), you need to get a line of credit set up with your bank or other financial institution.
Norfolk Capital can assist you in this with our Fix And Flip Hard Money Loans available. We allow you to stay one step ahead of the competition by quickly acquiring a property, having readily available capital to fund renovations, and maximize your ROI. With decades of experience as developers ourselves, Norfolk Capital’s team understands what it takes to succeed and can tailor a program to meet your needs!
2. Finding the house
The ideal house is one that’s priced below the recent selling prices of other homes in the neighborhood, but one that doesn’t have any major structural issues, such as major termite damage or a cracked foundation. You also want to be able to finish the renovations quickly, since you’ll be paying interest on your loan during the time you are fixing up the house.
How much should you pay? An industry benchmark says that you should only invest 70 percent (in the house and the renovations) of what the house will be valued at when you are finished fixing it up. For example, if a house will be valued at $200,000 when it’s renovated, you shouldn’t spend more than $140,000 on purchasing the house plus the renovations.
Remember that you’ll also likely have closing costs, a commission to your real estate agent and expenses for someone to stage the house before you show it.
3. Assess your renovation and design skills…and get started
You’ll get the most “bang for your buck” when you do at least most of the renovations yourself. However, some things like electrical issues, concrete work and most plumbing require a professional. Plus, you need to be realistic about your skills. You may need to hire outside help for the things you’re just not very good at. Few people are good at all renovation and design skills.
4. Get your home ready to sell
Once your renovations are complete, you’ll want to have your home staged, so it looks inviting to potential buyers. You’ll also want to add some plants and other items to boost the home’s curb appeal. Lastly, you should partner with a real estate professional who can market your property well, and get it sold quickly.
Are You New To Flipping Houses?
Norfolk Capital can help you get the financing you need to make your real estate empire a reality.
To learn more about how we can assist you with our hard money loans, short-term asset-backed loans and more, visit norfolkcapital.com or contact us at 781-262-8178. Our team has financed more than $100 million in real estate purchases and we’ll be happy to help you!
