House flipping has become a widespread practice among investors, as the opportunity to make a profit is high. According to RealtyTrac.com, investors flipped more than 100,000 homes in the first half of the year alone, making an average of $30,000 per flip. Experts warn to tread lightly, however, as many investors who are in a rush to make a profit overlook the basics and in turn, end up failing. Keith Flenniken, owner of the successful real estate business Flenniken Enterprises, knows the keys to success, as well as common pitfalls to avoid when flipping houses.
Look for potential
Successful flippers are able to look beyond deteriorated properties to spot potential. Outdated kitchens, floor plans, and other factors that don’t appeal to the conventional home buyer pose as opportunities for house flippers to make a profit.
Real estate is an expensive and complicated business. To earn a profit, the after repair value (ARV) must be greater than the original purchase price and repair costs. Therefore, buyers must accurately predict repair costs beforehand, as well as predict any unforeseen complications. Experienced flippers factor in a percentage for miscellaneous costs in order to avoid exceeding the budget.
Flippers need to be conservative when selecting design elements, as they must appeal to a wide range of potential buyers. In addition, splurging on high quality cabinets or a wall mounted TV adds to the value of the home and will help it sell more quickly.
Hire a team
To be successful in the industry, flippers need to understand both the cosmetic and fundamental aspects of the project. They aren’t afraid to bring in experts to ensure the job runs smoothly, even if that means spending more money than anticipated.
Expert flippers like Keith Flenniken understand that buying and selling houses takes time and sometimes, the profit is slim. Exercise patience when purchasing a property, as well as when putting the property on the market. Professionals urge rookie flippers to wait until the house is completely finished and staged with furniture before putting it on the market.