| August 11, 2015
House flipping gained popularity as the inventory for homes selling under market value increased, according to Fox Business. Before deciding to consider flipping homes, it is important you understand what the process entails and the potential consequences that may result from your journey.
"People get in the market thinking it's a great way to make money, and that's not the case," said Eric Dale, CEO of the National Fix & Flip Network, according to Fox Business. "A lot of times novices get in there…and six months down the road that house is in foreclosure."
Make sure you understand some key components of house flipping before embarking on this journey:
Invest in a suitable property
When looking to flip a home it is important that an investor considers the potential of a home and the surrounding area. Look for neighborhoods that are becoming more popular. A high volume of bars, restaurants and stores moving in is a good indicator that the area is developing into a neighborhood many prospective buyers will likely find desirable.
In addition, you will want to acquire homes in less traditional ways. U.S. News & World Report noted flippers need to find a house at a low price to ensure they walk out with a reasonable profit. Auctions, short sale and foreclosed properties will typically sell below market value. Before heading out to place a bid or make an offer on a home, make sure you establish a budget and ensure you do not exceed it.
Hire a suitable contractor
One of the most important professionals a house flipper can hire is a quality contractor. Make sure you get offers from multiple professionals.
While the lowest offer might appeal to you the most, also consider the work he or she has done in the past. Ask about past projects and whether you can reach out to previous clients. You can gain a better understanding of their work and make a more informed decision after speaking with someone who worked with them previously.
Stick to your timeline
Timing is everything when it comes to flipping homes. While accidents do happen, it is important to try to stay on schedule as much as possible. Ask your contractor for a time frame and remember to factor this in when figuring how much money you expect from the flip.