3 Habits of Successful House Flippers
If you follow real estate and investing, you’re undoubtedly familiar with the term “house flippers.” The people who occupy this segment of the real estate market have gained substantial visibility over the last few years due to several house flipping reality shows. The term flipping usually indicates a home was bought and sold within 12 months. To house flippers, it as an occupation or investment strategy.
The House Flipping Trend is Up in Numbers and Profits
Those who’ve been house flippers for more than a few years have watched a steady recovery in the opportunities to flip from the lows of 2008 and 2009. According to Realty Trac, the total number of annual flips is surpassed 100,000 units nationally. And, house flippers are enjoying record profits, with an average gross profit of $75,900 per home sold. This is accompanied by an average gross return of 36 percent on the initial investment, not including the rehab and related expenses.
The return of the market is bringing in new players, replacing many house flippers who left during the downturn. These participants are learning from the survivors who are now profiting. You would be wise to learn from their experience as well.
The 3 Habits
Successful flippers have shown the importance of three basic habits and disciplines that will help increase the probability of survival and success. While there are always differences in each marketplace, the southwest residential market continues to exhibit the single-most important trend for successful flipping – a growing demand for used housing.
Given that underlying demand, here are three habits you’ll want to develop to join the community of successful house flippers:
- Do Your Homework. While the traditional wisdom of “location, location, location” stands as a starting point for all real estate, the one thing that ranks nearly as high for a house flipper is market research. You simply have to know as much as you can about your micro-market, the overall market and the economics of any potential acquisition. The basic formula for all house flippers is to buy below the market, control your rehab costs, and sell at or above the market. However, each of those steps requires specific knowledge and insights, and a potentially lucrative purchase will go south fast if you were off with your assumptions. If you are the hands-on type that doesn’t like crunching numbers, consider partnering with someone who does.
- Use Your Head, not Your Heart. It’s easy to fall in love with the idea of house flipping. Taking a rundown home and giving it new life is an exciting and creative endeavor. However, never confuse a rehab project with the idea of creating your perfect home. You want to identify what has to be done to make a home salable at the best price providing the best net profit. That will often mean you choose a different type of flooring or fixture than you would for your own home. Keep your eye on the end goal of providing an attractive home for a potential buyer or renter, not something you would necessarily live in.
- Work within a Budget. Closely related to the first two habits, use your research and realistic remodeling plans to create and stick to a budget that meets your profit goals. Stay on top of this plan, and you’ll avoid nasty surprises.
These three habits will help you join the community of successful house flippers.