House flipping tips for today’s market
Back when the real estate market was hot—which seems like decades ago, doesn’t it?—there was money to be made flipping houses. House flipping practically became a sport, let alone a business. It’s even earned its own reality TV show, Flip This House.
But now that it’s a buyers’ market, and a tough one at that, can you still make money in the house flipping business—especially if you buy in expensive urban areas like New York and San Francisco? Yes, but only if you’re extra careful.
Here are four house-flipping tips for today’s market.
1. Buy a house in foreclosure or in a short sale
Sad to say, there’s still plenty of inventory in the foreclosure and short sale markets. But these properties, provided they aren’t completely dilapidated or located in terrible neighborhoods (or both), can often give you the most return on investment if you can buy them in a distressed sale.
2. Be a contractor
This may sound glib, but it’s true: The flippers most likely to make money buying and quickly selling a home today are contractors. That’s because contractors can do a lot of maintenance or repair work themselves, thus saving money when flipping a fixer-upper.
If you’re not a contractor, you should be an extremely savvy, seasoned real estate investor or have an experienced Realtor on your team.
3. Assume market values aren’t going to rise anytime soon
The best-case scenario is that the home you buy today and flip a few months later will earn you a profit. But if we’ve learned anything about real estate investing in the past few years, it’s that we can no longer assume the best-case scenario will kick in.
So if you do buy a house to flip, the safe bet is to assume that home prices where you buy aren’t going to increase in the next six months, or even over the next year or so. If you’re looking to hold onto the house as an investment for several years, and you’re not a contractor or ultra-seasoned investor, you’ve got a better chance of earning a profit. But that’s not flipping.
4. Do your homework
Real estate investing has always been about ‘location location location.’ But if you’re a flipper, I’d add that it’s also about ‘research research research.’
Whenever possible, know the neighborhood where you’re buying as well as you know your own. Consider focusing on one neighborhood or part of town and getting to know that area extremely well. Know the comps, so you’ll have a good idea of what people are willing to pay to live there. Pay attention to which features, such as views or proximity to highways, buyers are actively looking for there.
Buying in foreclosure or a short sale requires its own set of skills and savvy, so do your homework. I’ve covered the basics of foreclosure and short sales in my blog posts “How does foreclosure work?” and “What is a short sale in real estate?”
The bottom line
To put it simply: Get the best deal you can possibly find. Then, assume the worst market conditions. If you do both, you’ll increase the odds of being a successful house flipper.