Never overpay for a potential house flip, remember a home can only be sold for so much in a particular real estate market. This is because when you sell your house, banks and buyers will use other similar homes in the area or neighborhood to determine how much your house is really worth. So no matter how much you paid for the house or how fancy and nice you make the home, your ultimate sale price is going to be a direct reflection of how much other homes are selling for in the neighborhood. So when you overpay for a home, what you’re really doing is giving away the profit on the flip, as you can’t sell a house for more than it’s worth.
When looking for a house to flip, avoid houses that are in undesirable areas or have issues that can’t easily be fixed, even if the price is cheap. Remember when you get done with the rehab, you’re going to be the seller of the home. And no matter how nice you make a home, if it’s in an undesirable area it’s going to be a struggle to find a buyer and make a profit.
Even though popular house flipping shows barely mention or show the process of looking for a house to flip. Finding a house to flip can often be one of the more time consuming and difficult aspects of the house flipping process. For example, I recently went for several months without buying a house, because I couldn’t find a house that made sense. Sure I could have overpaid or bought a house for too much but then I would have been in real danger of ending up with a flop instead of a successful flip. My patience finally paid off though because after months of looking I actually found two houses back to back that made great flips.
You need to know the real estate market you are working in like the back of your hand. By this, I don’t mean go on Zillow and look at a few houses. I mean know everything there is to know about your local real estate market. Things you should know include price points, average days on the market, supply and demand, neighborhoods, school districts, local government, what the average home buyer is looking for, etc… Understanding your local real estate market can be instrumental in making or breaking your house flipping business. As it will not only help you identify a good deal when you find one but it will also help you to avoid overpaying or losing money when flipping houses. When it comes to market knowledge, your goal should be to know more about your local real estate market than anyone else.
Figuring out and understanding where to find the money to not only buy the property but also to rehab and carry the property is critical to being a successful house flipper. Because if you can’t find the capital you can’t flip houses.
If you don’t know where you can find money to flip houses, check out our article “How to Get Money to Flip a House” which gives all the best ways to fund a house flip. Or this article we wrote on “How to Flip a House with only $10,000“.
Learn as much about house flipping as you possibly can when first starting out, as this can help you to avoid costly house flipping mistakes. There are many great resources to help you get a good handle on house flipping. Below were some of my favorite resources when I was first starting out.
A house flipping team can help you avoid many costly mistakes and can save you a lot of time. House flipping team members can include seasoned and professional real estate agents, contractors, and sub-contractors, real estate attorneys, and accountants.
Too many would-be real estate investors get stuck in this phase of house flipping. They spend years doing endless amounts of research and thinking about flipping houses instead of just getting out there and doing it. While market research and understanding house flipping is critically important there is such a thing as too much of a good thing. As NO amount of study or research will ever teach you more about house flipping than flipping your first house.
Be creative when thrift shopping. Many items can be repurposed into something other than their original intention. Be sure to check out the framed art as well. While the actual art might be hideous, the frame itself could be really nice or valuable.
It’s always important to be kind, and the workers at thrift shops may receive less kindness than usual. In addition to spreading goodwill (no pun intended, hehe), befriending the thrift shop employees can work in your favor. You can ask them when the store restocks their inventory, as well as when they mark things down.