Is House Flipping Still Profitable?
Even in the high priced market, and the tariffs on the materials used to do house flipping, the success is all in the details.
The house flippers that I know and associate with do great sometimes and not so great other times. House flipping is profitable if you have ambition, energy, time and commitment and luck. The house flipping shows on television are exciting, and as you may have noticed, not every house makes a big splash in the market after it’s all done.
Here are some things to think about before getting started in House Flipping:
- Buy Low
- Have Your Team Ready
- Get Your Permits Early
- Consider the Holding Costs
- Get Funded
- Get the Project Done in a Short Time Frame
- Plan for the Unexpected
- Sell as Soon as Possible
Let’s go through each of these and learn more.
- By now you have probably read that house flipping success depends on buying low and selling high. The Deal is made at the Purchase Price. You must buy low enough that when you add all the expenses on for the labor, the materials, and the holding costs that you will still make enough profit to make it worth your endeavor.
- Today’s cities are filled with construction sites, and contractors are hard to come by. You must have your house flipping contractor wanting your project and ready to go as soon as you close on the purchase. Be sure to check the contractors’ licensing board, and do a bit of background check on your new contractor. I and many others I know have been taken for a ride by unscrupulous contractors.
- Make a trip to your local construction permit office and talk to them about your house flipping project. Find out what parts of your project you need a permit for, and which you don’t. It’s different from Springfield to Eugene, different in Cottage Grove and etc. If you get busted by the local construction permit office for not having the proper permits then you will be heavily fined and will have to take apart what you already accomplished.
- Plan your House Flipping Project. I use a simple Excel Spreadsheet to do my planning, and in it I plan my holding costs. If the project is going to take me 6 months from purchase to sell, then I plan 6 months of holding costs. If it’s going to take longer, because, let’s face it; it normally does take longer. The House flipping holding costs
- Interest paid monthly to the lender.
- Insurance – empty dwelling insurance
- Rent – if flipping a manufactured home in a park
- Real estate taxes
- Get Funded – by applying for funding before you start looking for your first house flipping project will make the possibility of closing on a deal much easier and faster. Get approved by a lender that specializes in this kind of work. Or you might want to hit up your rich uncle, just saying. If you don’t know how to get funded, please write to me or join the Oregon Real Estate Investors Association to get hooked up.
- Time is money, and when doing house flipping keep the cliche “Time is Money!”” in mind. The longer it takes the more it’s going to cost you. So make sure you are all over the plans, and on the phone, shopping for the flip, and working on the flip.
- What possibly could go wrong? A lot! It can be from discovering the foundation is bad, or that there is an add on to the house that was not permitted, or that there is mold behind the toilets, or water is coming in from the windows, the roof has to be replaced as well as the decking. It could be that the dry-wall guy plugs up the bathtub drain with his drywall mud and you have to get a plumber in to fix it. It could be that the nicely refinished wood floors got ruined by the plumber who came in to fix the drain. <LOL>
- To sell as soon as possible should be easy in today’s sellers market. However; if your advertising sucks or your pictures on the RMLS suck, or you didn’t hire a professional to list the property, it most likely will take you longer. I have been lucky a number of times by posting a free add on Zillow.com and sell fast. To do that, I price the house slightly under market value to get a lot of people interested.
While the eight rules may not be a conclusive list, it may help you to take a deeper look into the process before you hop right into House Flipping! I think that getting some education first is key to being successful in house flipping.