House flipping is practically an Olympic sport when the real estate market is booming. Real-estate addicts and aficionados have made a full-time gig out of looking for that diamond in the rough. They know that applying the right fixes to a fixer-upper can turn a pretty nice profit.
But has the recent dip in the market put a damper on the flipping spirit? Not necessarily. In some areas of the country, flipping is back and bigger than ever, and women are the one's leading the charge.
Think you've got the financial savvy to turn a profit on your first flip? Here are some fast and hard rules to remember before you start flipping.
Assess your financial situation
The flipping real estate market has taken a conservative turn since the trend started in the early 2000s. Fair warning: financial experts and mortgage brokers don't recommend entering the flipping market unless you are completely stable with your own income. You should have a major emergency fund available and enough cash in your reserves to avoid borrowing significant amounts from your lender. You'll also need a high tolerance for risk, a place to live during renovations, and nerves of steel.
Rookie flippers may think they should buy low and wait for the markets to rise. This is a risky gamble, and something you should avoid at all costs. Seasoned flippers will renovate a home's key rooms and reconfigure the layout in such a way that the upgrades increase its value regardless of the market.
Be prepared for anything
The flips with the most potential are usually older homes in need of a little elbow grease. A little deep cleaning, new paint, and updated lighting can go a long way to making a big difference. And while that might sound easy, remember – things are likely worse beneath the surface. Your best defense against major disasters is to start out with a full home inspection. A home inspector with look at the property's foundation and wiring, as well as leaks, cracks, and strange smells. But even if the house passes the most thourough inspection you're still likely to find a surprise or two hiding in a flip.
Before you start swinging the sledgehammer, take some time to visit open houses in the neighbourhood. Learn what's on the market in your area and what's selling. Consult with a mortgage broker and a real estate agent to know what you should be spending, and how you should be spending it. Pricey upgrades, materials and fixtures might not be the best investment if the neighbourhood is known for attracting lower income buyers.
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