Think Like a House Flipper

Being a house flipper is like being in charge of a three ring circus. House flippers face countless details. They negotiate with and manage many people, and they have to handle the wide variety of contingencies that arise. They must face all this with calm focus while keeping the goal, an advantageous flip, in mind.

The Minutiae

It’s not all glam and glitz. It’s arduous work and a lot tedium. So much of a house flipper’s time is spent paying bills, scheduling and overseeing contractors and subcontractors. They need to understand ordinances, zoning laws and complete due diligence tasks. Are you ready for the necessary minutiae?

Real Estate Markets and the Economy

As a house flipper, you must understand overall real estate market trends. Is it a buyer’s or seller’s market? If it’s a buyer’s market, you may not stand to make a profit.

You must analyze the region where the house is located. Is it economically stagnant? Is it likely to rebound? No matter how promising a property may appear, if it doesn’t offer an economic return of at least two to one, it’s not worth the risk. That return may hinge upon the region.

Neighborhood

A region may be economically robust with high home valuations; however, the home valuations of a particular neighborhood may ruin the flip. What is the condition of the neighborhood? If the house undergoes a total rehab that increases its value by $150,000, can the neighborhood sustain it? Will anyone buy into the neighborhood at that price?

House flipper, South Africa

Photo courtesy of Iqbal Osman1(CC Attribution)

People’s Taste

Flippers have to understand trends in people’s taste and what they’re interested in at the time of the flip. How well are homes with that particular layout selling? Are split level homes selling well? Is the ranch style out? 

The Math

Rehabbers must make accurate projections and calculations. Economic forecasts and trends, return on investment numbers, foreclosure price, estimated versus actual selling price of the flipped home, neighborhood home valuations and the cost of materials and labor are some of the variables you must properly weigh. Faulty projections and calculations may lead to an unprofitable flip.

Financing

As a house flipper, you must always consider funding. Upfront cash is the best means for purchasing property. If cash isn’t available, you may consider loans. Some flippers take out regular bank loans. Some utilize home equity loans. Some turn to hard money lenders who loan at high interest rates with extremely short, year-long terms. Some turn to partners and private money; others turn to crowdsourcing. You must make a sound decision concerning financing.

Purchasing and Selling Property

House flippers understand the intricacies of buying and selling a house. They may choose to hire a real estate agent or do it themselves, either way, they must understand the industry. They understand the contracts, forms and paperwork that have to be completed. They may have their representative, real estate agent or lawyer examine the documents to make sure everything is in order.

The Negotiator

Strong house flippers understand the bargaining process and how to negotiate with the goal in mind. They are skilled in making offers and counter offers. They are steady, calm and patient throughout the appraisals, inspections and financing process. To get overly emotional may lead to an unprofitable outcome. They keep their eye focused on the long term, not the short term.

Being a house flipper is truly like orchestrating a three ring circus. You must be able to think in an extremely detailed way, manage people and personalities, handle finances and make economic considerations, all while keeping the big picture, a successful flip, foremost in the mind.

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