House Flipping in 2017: Is it Still a Good Business Idea?

House flipping has long been a favorite method of starting out for those looking to build a property portfolio and make reasonably quick profits, sometimes on relatively modest investments. As the housing market crash of 2008 moves further away in the rear-view mirror many budding investors are asking themselves whether house flipping still makes good business sense. In the immediate aftermath of the crisis, cheap property was easy to find. Almost 10 years on, however, and it now requires a little more finesse to seek out and take advantage of such bargains. But they’re still out there. Here are just some of the reasons to consider investing in house flipping in 2017, along with some tips for those looking to flip their first home.

Do Your Research

The most important first step of any financial endeavor should be to learn as much as you can beforehand. If you know someone who has experience with flipping houses, ask them if they would be willing to mentor you, perhaps even invest alongside you. A smaller initial return is worth it for a lower risk while you learn the ropes and no amount of book learning can match real world experience. A book also can’t talk to you and respond to specific questions like a person can. If you don’t know anyone with experience, consider advertising locally for experienced investors or look for existing adverts seeking an investment partner. Be prepared to be brutally honest with yourself about what your capabilities are and if you have any doubts, do all you can to settle them before you commit any money. Learning as you go is a risky proposition in a volatile market like property.

Know Your Market

It makes the most sense to invest locally, or at least in an area you are somewhat familiar with. This is important for two reasons; familiarity with the cost of property and familiarity with the local tastes and styles. Foreknowledge in these areas will save you considerable time in planning and making your investment.

For example, the markets of New Jersey (NJ) and New York (NY) neighbor one another, but vary considerably in the rates offered on home equity loan rates. For a $50,000 loan the lowest home equity loan rates in NJ can be as low as 3.4% with monthly payments of $224 whereas in NY they start at 4.75% with monthly payments of $524.24. Some markets, for example San Francisco, will contain more buyers who are concerned about green energy technology such as solar power, and knowing these small details will help enormously in investing your money wisely and maximizing your return as well as making your property seem as attractive as possible next to all the others available in the area.

Find the Right Property

Of course, choosing the right property is key, but what the right property is will depend on the kind of investment you plan on making, the amount of money you intend to invest, and the time you plan, and can afford, to spend between the initial purchase and the final sale will both have an impact on the properties you consider and the one you finally settle on. If you’re looking for a small investment with a quick turnover, you should be looking for a property that is in good condition. You don’t want to be financing an entire remodel of the property or get bogged down in extensive redecorating only to run out of money before completion. If that happens, you may just end up selling the house on at a loss and giving someone else an even better opportunity.

The more money and time you have to play with, the more you can afford to make mistakes. Although you certainly don’t want to waste money (or time), a little bit of leeway will keep the stress at bay and offer a safety net for your first few investments. For this reason, the kitchen and bathroom should be the first two rooms you inspect as these are the most important in informing your decision. These are the two most expensive rooms in most houses to remodel and redecorate which is an important consideration both for you and any potential buyers.

As long as you don’t rush into things, take time to plan, and tread carefully, house flipping can be a very profitable and worthwhile endeavor. For your first investment, you’ll want someone on hand to advise, if at all possible, but once you have some experience and success you’ll be well on your way to making some serious money.

Thanks to Carol Trehearn