Flipping houses for real estate agents can be a fantastic way to diversify your business and make more money. Typically, flipping houses involves purchasing a home below market value (often a fixer-upper), making necessary improvements to increase its appeal to home buyers, and selling it at a profit. Realtors can represent themselves in purchasing and selling homes and use their expertise to make intelligent investments. By following a few steps, you can start flipping houses for a living.
Understand Your Skill Set, Assemble a Team, and Create a Budget
If you're already working as an agent, you're well on your way. You know what home buyers in your area want, and you're knowledgeable about which neighborhoods are up-and-coming or highly desirable. You'll utilize the information to find a home to flip, make improvements, choose finishes, and then list and sell. If you're a real estate agent already, you know you have those skills, but you also need to be realistic about what other aspects of flipping houses you can handle.
Sweat equity is essential to success in this business, especially when you're just starting. However, if you don't know anything about plumbing, carpentry, or electrical work, you'll need to bring in experts. Consult local tradespeople and be clear that you'll have ongoing work. If you can negotiate an arrangement with them in exchange for guaranteed work and loyalty, you'll be in good shape.
Once you understand your repair and remodeling expenses, you can create a budget. Experts recommend using the 70% rule in house flipping to plan your budget.
Secure Financing, Find a Home, Do the Work
If you can't pay cash for the home, you'll need to secure financing with a bank. Try to find financing experts who work in this field regularly. Treat this as a business transaction and the bank as your investor.
Identifying a home to flip will be different everywhere and depends on your unique situation. Follow the 70% rule and try to find a house that needs the kind of love you can give. Foreclosures and short sales are one place to start, but you can also look for homes that need cosmetic updates in desirable neighborhoods. Once you take ownership of the house, the clock is ticking. Every day that you own the home costs money, including taxes and insurance. That's why efficient renovations are so critical to success in this business.
Have your contractors ready to go before you close and try to do some of the work yourself by devoting some of your workdays to house flipping. Doing so requires intelligent financial planning since you won't see a payday until the house sells.
Finally Flipping Houses
Once the house is ready, use your expertise in the market to price, list, and market the newly renovated home. Know how much money you need to make on the sale and how long you can hang onto the property while remaining solvent, and let those factors guide you in pricing and negotiations. In addition, look to the future. You may want to take the bulk of the payoff from the home sale and invest it in another property to flip.
If you're not careful, flipping houses can cost more than you make. As a real estate agent, you already have the necessary market knowledge, but you can still fall into common pitfalls. These include sloppy or insufficient financing, not leaving enough time for renovations, overestimating your skills for repairs, and rushing the process. Real estate agents make some of the best home flippers, and for many, flipping houses becomes their primary source of income.
Want more advice on marketing for the real estate industry? Check out these FREE resources:
Should You Use Virtual Tours for Real Estate Listings?
Best Ways to Market Yourself as a Real Estate Agent
How to Host an Epic Open House as a Real Estate Agent
How to Find Your Perfect Home in the U.S.
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