3 Essential rules for beginners to flip a property in 2020

Posted On Thursday, 24 September 2020 20:14

Have you been asking the most important question that any house owner can, “How much is my house worth?” Are you unsatisfied with the price point that the online home valuation came up with? It’s time to start thinking about flipping your property. While house flipping isn’t as easy as it seems on reality shows, there are a few essential rules that beginners should follow to successfully flip their property. If you’ve been thinking about flipping your own home, or buying a property to flip and make a profit, here are the three essential rules that you need to follow to flip property in 2020. 

Rule number one: Follow the 70 per cent rule

The 70 per cent rule means that you can only spend 70 per cent of the after repair value - that means, you can only spend 70 per cent of the price that you would like to sell the house at once you’re done flipping it. What does this 70 per cent include? Everything! From the cost of accusation to repair costs, the cost of interior decor, fixing any noticeable damages, buying insurance, paying taxes, giving the house an overall lift, everything needs to be done within 70 per cent of the after repair value. This ensures that you can make a hefty profit after all the hard work that you’ve put into flipping the property! Keep in mind, it is possible that the prices of real estate suddenly fall during the period of property flipping, in which case the buyer's quote might not match your expectations. By having a 30 per cent margin, you still ensure that you make a decent profit as opposed to selling a flipped property for minimal profit.

Rule number two: Prepare yourself for unaccounted costs

Flipping a property seldom goes as planned. While the 70 per cent rule seems accurate on paper, there are quite a few costs that you might not account for. This is why you mustn’t account for the full 70 per cent while making your budget! Leave at least 5 to 10 per cent of the 70 per cent value aside so that it can cover unaccounted expenses. For example, you might underestimate the cost of repairs. Maybe you need to remove a whole wall or you find some leaky plumping which might need fixing. You might fix a certain budget for interiors and lighting, but it is pretty easy to go overboard to make the property reach its full potential. In that case, you will be able to use the 10 per cent of your budget that you put aside instead of dipping into your profit margins in order to complete the flipping process.

Rule number three: Smart renovations are the best renovations

If you’ve got the soul of an interior designer, you’ll want to throw everything out of the house and start from scratch. But, is that a smart way to use your budget? You need to focus on smart renovations. Let’s say you’re thinking of renovating the kitchen. Now, you could either spend the majority of your budget on creating a modular kitchen with custom cabinets, high-end technology and fancy tabletops. Or, you could go for something simpler. You could touch up the cabinets with a fresh coat of paint, replace the appliances for a modern touch, use granite countertops for an elegant finish and give the whole kitchen a new paint job. It’s all about finding the right balance – you need to make sure that the property looks good without spending too much of your budget on one particular place. Also, don’t underestimate the importance of small touches. A new coat of paint inside and outside, a touch of good lighting, a quick fix to the hardware and a slight focus on landscaping can go a long way. 

While these rules might sound simple, putting them into action requires making a conscious effort. To successfully flip a house, you need to convert everything into monetary terms. Make a budget for repairs, interiors, painting, upgrading etc and stick to it. Try to understand how and where to spend your budget, wisely, to make a good return on investment. It’s also important that you have a team in place before you even buy the property you want to flip. This includes, but is not limited to, a real estate agent, handymen and contractors, an accountant that can handle your finances and so on. That way, as soon as you buy the property, you can start working on flipping the property instantly. And, as we all know, the longer a property stays on the market, the longer it takes to sell. Once the flipping process is complete, ask your real estate agent to get to work and find potential buyers. Lastly, know when you’ve got a good deal and know when to walk away. 

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