There are mountains of information surrounding flipping a house. From wholesaling to rehabbing, its up to you to decide which method works best for you. At Modessent Homes, we like to involve ourselves in rehabbing. We like to add value by updating and modernizing homes that are otherwise distressed or outdated. Here at Rehabber Central, we would like to provide information to those seeking to start a rehab project of their own. We hope you learn and enjoy.
What Is House Flipping?
Many definitions exist, but simply put flipping a house is the act of purchasing a property and then reselling it for a profit. Oftentimes, the property is purchased very inexpensively, either because it is “distressed” (i.e., in need of repair) or the owner of the property is desperate to sell (divorce, forced to move, financial troubles, etc).
There are two basic strategies for flipping houses, each of which has it’s own benefits, drawbacks and risks:
Wholesaling involves purchasing a property and immediately (oftentimes the same day or even at the same closing table) reselling it to another investor for a small profit. Wholesaling doesn’t require the house flipper to do any work on the house, and sometimes doesn’t even require the house flipper to put up the money for the house. A good wholesaler must be a strong negotiator and marketer, as he is merely turning around and selling the exact same property he just bought, but for a profit.
Rehab and Resale.
This is what we do and is probably what is most commonly thought about when someone hears the term “house flipping.” The investor will buy a property — generally at a large discount — bring in contractors to fix-up the property, and then resell the property, either to home buyer who plans to live in it or another investor who plans to rent it out.
To be successful in the house flipping business, you must have a number of skills or have the right members on your team.
The Successful Rehabber
- You have to be able to find great deals. Homes at deep discounts. This may involve a real estate agent, or may just involve spending lots of time talking to potential home sellers and negotiating deals yourself.
- You have to be able to get houses renovated quickly and inexpensively. This often involves having a set of contractors who will renovate your properties skillfully and at a reasonable price. And if necessary, renovate what you can on your own.
- You must be able to sell your properties, either to homeowners or other investors. Again, this may involve a real estate agent (recommended!) or may just involve selling the properties yourself (known as FSBO or “For Sale By Owner”);
- You must have the business and management sense to keep projects on-schedule and on-budget, and to make the proper renovation design decisions.