House flipping has been on the rise for some time, and with several popular house-flipping television shows being broadcast daily across the country, it is easy to see why it is so appealing. A thirty-minute episode makes the overall process look pretty easy to flip a home and resell for a substantial profit, but don’t be fooled! There is much more involved with flipping a house than what you see on TV. If you intend to take the plunge and start your flip project, research and educate yourself on the dos and don’ts of flipping a house.
What is House Flipping?
House flipping is a popular term used in the real estate industry to describe buying, fixing, and reselling a property for a profit. Most of the time, the ‘flipping’ involves renovating and repairing the house to bring it up to date. This allows the investor to turn around and sell the home for a much larger price, pocketing the profits. House flippers are typically real estate investors who seek out distressed or undervalued properties, purchase them at a discounted price, renovate or improve them to increase their value, and then sell them quickly for a higher price.
Flipping houses can be a lucrative investment strategy when done correctly, but it also requires much knowledge, skill, and capital to execute effectively. Successful house flippers must be able to accurately assess the costs of repairs and renovations, determine the appropriate market value for the property after the improvements, and have a good understanding of the local real estate market. Just as quickly as it’s gone right, a house flip can also take a turn for the worst and can cost you money. This is why researching and making wise choices is always the best option!
5 Things to Remember When Flipping a House
Location is Everything!
Location is critical for both purchase and resale prices, as purchasing a home in a great neighbourhood will result in buyers also wanting to be in that neighbourhood. Also, remember who your target buyer is going to be. Knowing the liveability factors of the area you choose will play a significant role in how you renovate and market your flipped home. According to the 2020 RE/MAX Liveability Report, Canadians put easy access to shopping, dining and green spaces at the top of their liveability criteria, along with proximity to transit, work and good schools. Work with a realtor who knows the market and area and can find you a fixer-upper in a great neighbourhood at a great price!
Consider Your Target Buyer
Once you’ve narrowed down your preferred neighbourhood, consider the type of buyer you want to purchase the home from once the flip is complete. By doing this, you can renovate the house to cater to their preferences and budget. If your target buyer is a new family, consider the features that will benefit them as their family and kids grow, whether that be lots of storage or good backyard space. If you’re renovating to sell to a professional couple, consider their lifestyle and what elements you can put into the home that will cater to them. Considering your target buyer can help not only give you direction in the design and renovation phase of the flip. It can also help you with the resale value, as your flip will hopefully check all the boxes for potential buyers!
Find a Reputable Contractor
After locating a great neighbourhood and purchasing a home, it’s time to find a contractor to carry out the renovations required for your house flip. Take the time to interview different contractors to find someone you will get along with and who understands your vision for your house flip. One of the best ways to find a reputable contractor is by asking trusted friends and family for referrals. Someone in your circle has likely worked with a contractor they trust and can refer their name to you. Don’t forget to get quotes from your contractor. This way, you agree on the renovation cost and the project timeline. Another great way to find a reputable contractor is to visit the Canadian Home Builder’s Association website. They have many great tools and resources to help you find the right contractor for your renovation.
Consider Your Timing
Timing plays a vital role in your house flip, and because you’ll be making mortgage payments, you will want to sell the property as soon as you’re done renovating. Consider the timing of your purchase, how long the renovation will take and when you plan on selling. When you start working with your contractor, set a timeline for the project and stick to it. Having a quick turnaround from the purchase date to the sale date is ideal as you then won’t be stuck having to pay the mortgage while the house sits empty, either mid-renovation because of going over your timeline or sitting on the market if you try to sell at a low point in the year. Be conscious of your timing and plan everything out as best as possible to avoid any situations affecting your budget and overall profit.
Determine the Right Asking Price
Once you’ve completed your renovation, determining your project’s asking price is the final step. Check with your realtor to choose the right asking price for your property. You want to ensure you’re attracting buyers, covering your expenses and making some money on the flip. Pricing too high for the neighbourhood can turn buyers away, leaving you stuck paying the mortgage while the house sits empty. Pricing too low might attract many buyers, but you may not make enough to recoup the costs and profit from the flip. Your realtor can suggest an appropriate listing number based on the location, liveability factors, upgrades and other comparable properties in the area.
Is Flipping a House Worth the Investment?
Whether flipping a house is worth the investment largely depends on various factors, such as the current state of the real estate market, the location of the property, the cost of renovations, and the overall demand for the property in the market. When done correctly, flipping a house can yield significant profits quickly. However, it can also be a risky investment, as there is always the possibility that the property will sell slowly or that unexpected expenses may arise during the renovation process, cutting into profits. To make a successful house flipping investment, it is essential to conduct thorough research, have a solid understanding of the real estate market, and carefully evaluate the potential risks and rewards. Ultimately, deciding to flip a house should be based on individual circumstances and personal goals. Investors should be prepared to invest time, effort, and resources to ensure success.
Is Flipping a House Right for Me?
Ultimately, the decision to flip a house should be based on a thorough evaluation of your circumstances, goals, and experience level in the real estate industry. Flipping a house can be a high-risk, high-reward investment strategy that requires significant time, effort, and financial resources. If you are considering flipping a house, being honest with yourself about your expertise and experience in the real estate industry is essential. When considering the decision to invest in flipping a house, partner with a more experienced investor or seek the advice of a real estate professional.
Flipping a house is a tremendous job that can seem daunting to those who have never gone through the process. If you take the time to research and educate yourself, work with a great realtor and contractor and stick to your budget and timeline, you can reap the rewards of your hard work when your flipped property sells and you pocket your profit!