The 3 Most Important Things in House Flipping

Man looking at paint swatches, house flipping concept

There are many important details to plan out when completing a successful house flip. You have to find the right property. You have to have a good renovation plan. And, you have to sell the property for the highest possible price.

So, how do you accomplish this? We won’t get into the minute details today. You can check out the PropertyLark Buyers Blog for plenty of articles about house flipping and real estate investment tips. In this article, we want to focus on the bigger picture. These are the three most important things to consider when planning a house flip:

1. Property Analytics

This is where many real estate investors and wannabe house flippers fail. They don’t spend nearly enough time on the property and market analytics. This should be your most important step when searching for the ideal property (or properties) to buy, renovate and flip. Each property should be evaluated carefully on an individual basis. Research the market and the neighborhood where it is located. What are similar local houses going for when in good condition? Is it an up-and-coming neighborhood or an area on decline? What is the real estate market like, in general, for this location? What will the market look like when you are actually ready to sell?

Then, you want to dive even deeper into each property. Is it a good floor plan or do structural renovations need to happen? How much will it cost you to renovate? How long will it take you to renovate? What will the market and buyer demand look like when it is ready to sell? The renovation costs are extremely important to estimate before you buy any investment property. Some houses may have “great bones” as the TV renovators say, but you may end up having to spend more than you can make in the resale. Understand renovation expenses and profit potential. Make sure there is plenty of meat on the bone before you make an offer!

2. Budget

You should have a budget going into any investment property purchase. How much are you willing and able to spend on the house and renovation costs? How much profit are you aiming to make when the house flip is complete? This is just a general budget to help you with your property analytics—as well as setting your offer price.

Once you actually decide to buy a property, then you will have to get even more detailed and specific with your renovation budget. Plan out your construction budget. Set your priorities of the repairs and renovations that need to be made. Some aesthetic touches and upgrades may be nice to include, but they may not be necessary. Prioritize the most essential items first.

Also, be conservative in your renovation budgeting. Expect the construction process to cost more and take longer. Expect the unexpected because home renovations rarely go exactly as planned. Set your budget at the highest range, so you have wiggle room throughout the process. You may end up having to sacrifice some of your lower-priority items, but you will avoid going over-budget. If you end up under budget when things go as smoothly as hoped, then you can squeeze in some of those extra touches to put the house over the top.

3. Time

Time is often your biggest challenge as a real estate investor. House flipping takes some patience, but you can’t let the process take too long. An additional three months for renovation could end up eating into your entire profit margin. Do what you can to avoid costly construction delays. Build your construction budget and timeline carefully to ensure you and your crew stay on track every step of the way. Set key milestones and manage the project diligently. Again, you may want to be a little conservative when setting your timeline. Plan for the worst and hope for the best.

Take your time upfront to do your market research, find the best property and plan out your renovation. This will help you save time and avoid major problems during the process.

Focusing on these three key items will help you develop a recipe for success as a fix and flip investor. Nobody ever said house flipping was easy, but smart planning and preparation can make all the difference.

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