Beginners Guide to Flipping Houses

If you're new to flipping houses there are several things to know before you begin. First, if you are going to be a house-flipper you cannot make emotional or sentimental decisions about purchasing properties, as each must be treated as a business operation. Here are a few tips about house-flipping for the beginner.

Understanding Equity

The fundamental thing you need to know about house-flipping is how equity in a home works. Equity basically is the difference between the outstanding balance of the mortgage and how much the property is worth on the market. Before you buy a home that you want to flip it is essential that the home have some equity. How much you spend on the home in repairs and upgrades will determine how much equity the home needs to have for it to be a profitable business decision for you. Successful house-flippers are excellent numbers-crunchers, so do the math. If the home doesn't have any equity in it then you can create equity. First, get a good deal on the sales price of the house. For instance, if a home's fair market value is $100,000 then buying it for $80,000 will instantly create $20,000 in equity. Of course, you'll need a motivated seller who is desperate to get rid of the property.

Buy Low, Sell High

Once you buy your property you can employ the "buy low, sell high" strategy. You can sell the home at market value and pocket the difference or you can upgrade it and raise the price. At that point, your profit will depend on how many upgrades and repairs you did to the property.

Timing Is Crucial

The third and final goal is to sell the home in a timely manner, as the savvy house-flipper does so before the first mortgage payment is due, usually within 45 days. The longer you wait to sell the home, the less profitable the deal is because you'll have to start paying the mortgage. Because timing is so critical it's a good idea to put the house on the market before upgrades or repairs have been completed to give you enough time to find a buyer. If you purchase a home with the intention of flipping it but hold on to it for an extended period of time then it's best to readjust your goals. In house-flipping, timing is everything.