What You Really Need to Consider Before Trying Your First Flip

The dream of the income property is still alive and well, whether it’s in the form of renovation and rental or picking up an out of shape house and flipping it for straight profit. Flipping a house isn’t quite as easy as the TV shows make it look, though, and if you’re looking to try your first flip, there are some things you should consider beforehand to make sure you get the most money after the fact.

Budget

This goes for time and money. You’ll start out with a calculated timeline and what seems like a reasonable budget. You might even build in a bit extra for delays in work or unforeseen expenses. No matter what your spreadsheet says now, assume that figure is a low-ball. Most flips run over budget and over schedule, simply because certain things won’t be known until you start the process. Bad plumbing and faulty wiring, for example, often aren’t seen until after the property is purchased and the demolition phase begins. Those kinds of problems end up costing thousands extra and days or weeks more than planned.

Take a look at your budget now. If you’re operating within narrow margins, the type where the property is only worth buying if you don’t spend any more than you currently have planned on the renovations, a flip isn’t for you. There’s a reason not everyone is out there doing this – properties that are affordable and require just the right amount of work to not eclipse resale value aren’t abundant, and competition is often fierce. Consider what you’re really getting, and what you can really afford. If you only have what you plan for, or if you can only take 3 weeks of work to make it happen, you’re budget isn’t reasonable for a flip.

Your Team

First, realize something important – you can’t do it all. Certain things are going to be difficult for you to do on your own, such as installing large fixtures, while others might lead to illegal results if not undertaken by a professional, such as electric wiring. Figure out who’s going to be on your team before you ever have to start working with them.

If you have a partner in the process, all the better! Make sure you guys are on the same page when it comes to how labor, financing, and the end sale will work. The more you’re able to manage expectations, the better you’ll be able to get through any difficulties that may arise.

Talk to plumbers, electricians, and contractors beforehand, too. Even if you do the bulk of the work on your own, you’ll likely need each of those at least once. Take the time beforehand to set up a team that you know you can trust – read reviews, check licensing, talk cost and payment, make sure everything is in order. That way, you’ll be spared the stress of having to bring in a random company of unknown quality later on.

Function vs. Aesthetic

You want to make the house look good, that’s what going to sell it later on. But don’t ignore necessary upgrades that may not be seen in favor of purely aesthetic features. Cutting corners structurally to add more funds into the feature fireplace you’re planning isn’t just unethical, it could lead to lawsuits later down the road. Make sure everything is structurally sound first – have inspectors come out and let you know where the problem areas are. Worry about how good something looks after that.

On the same note, remember that just because something looks good doesn’t mean it’s functional. Adding pieces that have no functional purpose, such as unnecessary extra cabinets in a kitchen, might offer some visual appeal on paper, but they could end up clogging a space and actually driving the renovation value down. Look around the area – see what the top sellers are highlighting. If an open floorplan is what’s moving in the area, go for that even if it means modifying some of the original design. It’s more about what’s going to sell than what the flippers think will look good. Give your buyers the space that they’re going to want.

Permits

This flies under the radar with a lot of first time flippers. Even when you own a property, you aren’t able to do anything you want to it without some general reporting or oversight. Check with your city, county, and state to see what on your list of renovations will need a permit before you ever touch the house, and get those permits straightened out in advance.

Not having a permit or having improper permits could slow a project by weeks or even months. Front-load the hassle to make things easier as renovations get underway.

There’s no one right way to flip a house, and when it’s done right, working on your fist income property can be an exciting new business venture. Just make sure you have at least some of your flip beyond wall colors and room flow figured out early. That way, you’ll be ready to handle the rest as it comes.

Will Millenials Start Purchasing Property Online in Coming Years?

You can video chat with someone on the other side of the world. You can wirelessly charge your phone. Tell that to someone from a decade in the past and they would be shocked at how far technology has come. It’s only the beginning. What if, 10 years from now, it’s common to simply buy a home online once you’re ready to be a new homeowner? It’s possible today, but will it become commonplace tomorrow?

Advancing Real Estate Purchasing Technology

One of the main online real estate purchasing consumers are Chinese who are beginning to invest in the U.S. real estate market. Instead of traveling to the country, they use 3D virtual tours, video and online real estate value assessment websites to help them decide where and how to purchase both residentialand commercial property in the U.S. Websites such as the giant Auction.com has received millions in capital investment in recent years, partnering with Chinese website Juwai.com as well.

Are Real Estate Agents Threatened?

Looking ahead to the future, the real estate industry, and agents in particular, may be wondering what this means for their careers. Will their come a time when their knowledge will be viewed as outdated, old-fashioned and unnecessary? Will they lose their job to an automated online service that processes the transactions, leaving no room for them?

Why Online Real Estate Purchasing Still Has Far to Go

While investors from distant countries or even states may find online real estate purchasing helpful for their schedule, why buy a home online that you can visit in person? Millenials are not dense enough to think that buying a home is equivalent to buying a pair of shoes – online is definitely not preferred when it concerns the place you’re going to live and raise a family. While an online 3D tour might help you decide to visit the open house this weekend, it’s doubtful that it would cause you to plunk down a few hundred thousand dollars and sign your name to a 30 year mortgage without ever viewing it in person.

Also, there are a number of legal and financial steps that go into purchasing a home. Real estate agents earn their money. They educate people on the intricacies of the process, something that first-time millenial home buyers need. Not to mention, in most cases, the home seller pays the commission, not the home buyer. If anything, those who already opt to sell their homes without the help of an agent are probably the people who are going to take advantage of online services, but buyers may still prefer having an agent take care of the bargaining for them.

If there’s any generation tech-savvy and modern enough to take the leap and buy their home online, it’s millenials. But until a system arrives which walks them through the process step by step, explaining all details along the way, millenials are not impulsive enough to put their savings into an investment which may be the most important of their lives without viewing the property in person – at least, it hasn’t happened quite yet. The skill and knowledge of a realtor can’t be priced and can’t be ignored for first-time millenial home buyers. But when they purchase their second home? Maybe then they’ll take the next step.

Starter Home or Forever Home

Buying a Starter Home vs. a Forever Home: Weigh the Pros and Cons

If you are preparing to invest in your first home, you’ve probably had the discussion with your significant other or another trusted family member or friend: should you go big or go home? If you rephrase that question, it may sound like “should you fork over the cash for your dream home, or should you settle for a small beginner’s house?” Either way, you’re technically going “home”, it’s just a matter of how big your mortgage will be and whether or not you should throw away your moving boxes or save them for a few years.

Many adults struggle with the debate over purchasing a starter home or a forever home, but most of time it comes down to money. Unless you want to take out title loans, your best bet is to save and purchase what you can afford. If housing prices are high, your credit is less than perfect and you don’t have a large down payment, starter home may be your choice. If the housing market favors the buyer, you have excellent credit and the cash and monthly payment capability to make your forever home yours, maybe your focus is different. But don’t forget these additional pros and cons, questions and answers when making your decision.

What are Your Family Goals?

If it’s just you, or just you and your dog, or just you and your partner, you might only buy a home big enough for your small family to fit comfortably. But what are your goals for the
future? Do you want to have children? If so, how many? Do you anticipate an aging parent or other loved one may need a place to stay? If in the next five years you’re going to need more space, it might be better to look beyond the current square footage of the homes on your list, even if it means expanding your budget. It takes a lot of time and work to both buy and sell a home. If you’ll have to repeat the process in only a few years? Maybe it’s best to compromise between starter and forever home and purchase a middle-of-the-road property you can see yourself living in for at least 10 years.

Is This Your Starter or Forever Neighborhood?

Many people only look at the home’s specifications when determining their like or dislike, but consider the surrounding neighborhood as well. How far of a commute is it to your current job? Do you anticipate changing job locations in the next few years? If so, will that drastically change your commute time? If you have children or plan on having them in the future, do the local schools reach your standards? Is there a gym, grocery store and park nearby for you to enjoy? While these factors are important in both a starter home and a forever home, they may determine whether or not a home fits into either category, or no category at all.

Can You Find a Home with the Possibility of Expansion?

The best of both worlds? Finding a home that fits your space needs and the confines of your budget today, but allows you the opportunity to expand in the future. Instead of saving money to move and start your house hunt all over again, you could find a home you fall in love with then use your savings to finish the basement, add a room over the garage or put in a swimming pool over the next couple of decades. You could end up with a forever home, even if it doesn’t look like one the moment you buy it. If you are considering a renovation or expansion project home, make sure to review local building codes and the plot and plan of the home before you count on this as an option to be sure your dreams can become reality at some point in the future.

Benefits of Sticking to a Starter

Buying a starter home lets a new homeowner experience the process for the first time, from placing an offer to receiving their first set of house keys. It’s an exciting journey, and it’s an educational experience. New homeowners can learn what they like and don’t like about their recently purchased home and decide what they will do differently the next time around. If a starter home is cheap enough, it’s also possible for some to retain the property for rental income instead of selling and using the future cash flow to build equity and fund their dream of a forever home in the future. Starter homes are most likely lighter on the wallet as well, allowing younger homeowners to shed college debt and get stared on their retirement savings instead of wrapping up their entire income in a mortgage.

When Should You Take the Chance on Your Dream?

Obviously, you should not buy a home you cannot afford. You will set yourself up for a high level of stress and possible foreclosure. But in some cases, you don’t have to look for the cheapest house on the market if other areas of your life are coming together and you foresee job security in a reliable industry. Here’s the main thing to focus on: if the difference in price between your starter home and your forever home isn’t that large, it may be worth it to make the larger investment now. You want to have time to spend in your forever home, not wait forever to find it. When you spend money on future improvements, if any are even needed, you get to enjoy it, not simply look forward to the day when you can sell it and hopefully score a profit. You can raise your family and keep your memories intact under one roof.

Only you can be the judge of whether you’re ready for forever, or if it’s best to work your way up the homeowner ladder. Consider each perspective carefully before deciding – purchasing a home is one of the most life-changing financial decisions you can make.