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Things To Know Before Start Flipping Houses

Things To Know Before Start Flipping Houses

Buying and flipping houses are more than a financial investment. Flipping houses requires knowledge, planning, and funding. On average, a rehabber or flipper aims for a 10% to 20% profit, but it fluctuates depending on the value in the market and risks. Significant risks are involved in purchasing a home, fixing it up, and selling it. Consider the following things before jumping into flipping.

Keep Financial Risk Low

The main aim of flipping houses is “Buy low and sell high” in order to make a profit. It is important to minimize your financial risks while increasing your potential profit. One of the biggest risks involved in flipping is losing your money if you are not careful enough. Set a budget and have a solid plan before you get started. 

Estimating Your Budget 

Figure out how you finance your projects and remember not to spend a single penny more than you make. If you don’t have enough budget to put toward the project, you can apply for loan to cover the deficit funds. Make sure to have a good credit score to become eligible for the loan.

Inspect And Assess The Location

Buying properties without inspecting the neighborhood leads to tremendous pitfalls. It is a good idea to get a professional inspection to check the property’s condition, suppose it needs extensive repairs. This will help you evaluate the budget and the additional work that needs to be done. 

The 70% Rule

A key element in house flipping is purchasing properties at a low price, rehabbing them, and selling them for a higher price. The 70% rule helps the flippers quickly analyze the maximum purchase rate to offer for a property. The rules state that you should not pay more than 70% for an investment property’s ARV (After Repair Value) minus the cost of repairs. 

Whether you decide to get into house flipping full-time or keep it as a side hustle, remember the risk of time, energy, and loss that comes with it. It is always a good idea to have a backup fund in case you lose money.

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