If you’ve seen any of the popular television shows about flipping houses for a profit, you’ve probably thought to yourself – “Hey, I could do that!” But watching a half-hour program that condenses the lengthy, often half-year, process into a seemingly simple hobby doesn’t come close to giving a clear picture of how to flip a house. The reality is typically much different than just finding a cheap rundown house, fixing it up, and watching the cash roll in.
It all starts with getting educated. Not only do you need to acquire intimate knowledge of the local real estate climate, you need to know which areas are in the highest demand as far as schools, amenities, and employment opportunities. You also need to be able to assess whether a home is structurally sound, because you don’t want something that needs the bones replaced. A flip can turn into a complete tear-down/rebuild if not inspected properly before purchasing.
Be prepared to invest sweat equity. The biggest profit opportunity comes from being able to do as much of the work yourself as possible (paint, landscaping, etc). You’ll also want to have an idea of how much it will cost to hire contractors to do the things you cannot, for example plumbing and electrical. Note - don't try to do work beyond your expertise - it'll show to prospective buyers and make them question the rest of the home. Not to mention, it's a liability.
Have cash in hand – real estate is not a cheap business to be in and you’ll need money for down payments, fees, and other miscellaneous expenses. Most importantly, remember that it’s very easy to get in over your head if you don’t know exactly what you’re doing, so take into consideration whether you really have the time and money to learn how to flip a house.