If you’ve seen the shows “Flipping Boston” or “Zombie House Flipping,” there is a high chance that you caught the home project flu. It is satisfying to watch a glow-up in the neighborhood actually happen and see that people involved in the project profit from it. There is a growing trend in the number of house flippers, especially during the pandemic.
In 2019, 6.3% of the houses bought were flipped. This number rose at an all-time high during the pandemic. Last year, the first three months had 7.5% of the homes sold as flipped houses, an all-time high since 2006. Although there are no statistics regarding the latter quarters of 2020, the industry’s adaptive measures towards COVID-19 restrictions project a steady increase in the number of flipped home buyers.
What Is House Flipping?
House flipping is a practice by real estate investors, wherein the houses purchased at a lower price than usual are renovated into livable and updated homes. The prices are sold at a profit, with investors receiving a decent return of investment through the upgrades. Before the flip, some houses located in neighborhoods tend to be problematic as they invited unwanted neighbors. House flippers tend to be welcome guests to fend away this security risk.
During COVID-19, the industry was seemingly unaffected, as safety gear was already a standard among anyone who had to work in renovations. For example, they usually wear masks to protect themselves from dust and help reduce the smell of paint while working. The main adaptive measure by the industry was to provide virtual house tours instead of physical open houses to keep buyers indoors.
People who try to enter into house flipping tend to be put off by how capital intensive it can become. Experienced house flippers will know that there are ways to get the job done without having actual cash on hand. Forbes suggests that prospective house flippers can look into loans by private money lenders and hard money lenders for some early on financing. Even though these options tend to provide a high interest on the loans, it is a step towards starting to work on getting your return on investment as fast as you can. Besides, high interest on the loans can usually be covered by the extra money you make in the short period you make a house flip.
There are even go-to home contractors that focus on you getting a return on your investment. Do not attempt to work with unlicensed contractors. There are plenty of news articles that can convince you that a deal with an unlicensed contractor will only cause problems for both parties in the end. When things go south, an investigation on the unlicensed contractor will definitely be charged, and you will have to deal with expensive repairs on top of remodeling what they messed up. Go to a professional, registered company that can do the job right for you. A license can mean saving you money in the end, with an average return on your investment of 80% for most renovations.
How to Prepare for a House Flip
The most common remodeling that people want to be done is their kitchen, and you are most likely going to be working on a lot of kitchen rehabilitation during the flip. The kitchen tends to draw in molds after it has been used and left unattended for years, which is usual for houses bought on a foreclosure.
Be prepared to wear appropriate personal protective equipment before inspecting that home. Make sure to wear the full attire: a protective covering over your body, goggles, masks, and gloves. It is important to keep these on during the entire inspection. If you need fresh air during an inspection, head outside of the house before removing the mask. When you remove your mask in a moldy room, there is a good chance that you will inhale spores in that room and that you will get sick later.
Don’t worry about getting a real estate license before you do a house flip. Here’s an interesting fact: you don’t need it. You can do it yourself or hire someone in the meantime while you learn the ropes. Even though it will give you an advantage when selling, you don’t really need it yet.
House flipping is a lucrative source of income, so long as you know how to maintain the rehabilitation at the budget you’ve set. Be prepared to shell out plenty of capital at the start of the project. It will all pay off in the end.