House flipping is becoming a popular side hustle for individuals wanting to invest sweat equity in a property and sell it for a profit. However, it’s not as easy as HGTV makes it out to be on Flip or Flop. It takes a lot of time and effort, but most importantly, it requires knowing where to find cheap homes in Norman.
Begin with a budget
Just like purchasing a home, you’ll need to know your budget when you are looking to flip a house. The word “cheap” is pretty subjective. For some people, it could mean finding a home under $100,000 and selling it for $125,000. It could also mean finding a home for $250,000 and selling it for $275,000. Cheap doesn’t necessarily mean the actual price of the house, but instead, it’s what you’d buy it for versus it’s potential to sell at a higher price.
Regardless, you have to know your spending limitations. How much cash do you have on hand for a down payment? How much can you invest in a renovation? How long can you have your investment tied up in an asset?
It helps to divide the budget into parts: Purchase price, renovations and carrying cost, selling expenses and flex spending for unexpected issues. Most importantly, make sure you consider all the costs and don’t invest more than you’re willing to lose.
When you begin hunting down a new investment property, an excellent place to start is online. Check the inventory with your local realtors, and then explore listing sites. Remember, listing sites are not always updated, so you could have interest in a house that’s no longer on the market. The best approach is to find a realtor who is familiar with the market and can help you snag a great opportunity.
Take a drive
You can nail down a few online options and then take a drive. Observe the home from the sidewalk, consider nearby amenities and rate it compared to your other options. Take some time to wander around different neighborhoods. Find “for sale” signs, and if you see an exciting property, contact your realtor to learn more about it.
Check your credit score
Even a cheap house can be expensive if you have to agree to unfavorable loan terms and interest rates. Before you wholeheartedly commit to flipping houses, check your credit score. See if it needs to improve before you start making investments. You could save yourself thousands if you have a healthy score.
When you’re done, talk to lenders so you’ll have a realistic expectation of financing options. Traditional loans may be available, but they are typically slow moving and could increase your time investment. You might be able to find affordable private loans or investors.
Do your research on popular locations
If your investment property sits on the market for months after you’ve completed renovations or repairs, you’ll be losing a lot of money and potential profit. Make sure your cheap home won’t cost you big by being in an area where buyers don’t have much interest.
Here’s where you’ll need to lean heavily on your realtor. Make sure you’re taking advantage of their expertise in the community. Ask them questions about why some neighborhoods are moving inventory fast and why others are not. Learn about trends and the city, and see if they can offer you any valuable insight on what area might become the next hot spot.
Attend city council meetings and zoning commission meetings. Are specific areas popular because there are plans for significant commercial developments? Are other areas fighting the possibility of losing their homes to eminent domain because of a new turnpike? Could industrial zoning encroachment affect the property value of a home you’re interested in flipping?
You can’t depend on your preferences to determine what is and is not a good property. Instead, you’ll have to know the market trends and learn what current buyers expect.
Learn how to spot expensive renovations or repairs
Some homes might have massive and costly hidden problems. Is the house on a shaky foundation? Could there be termite damage? Is it possible the electrical wiring isn’t up to code, or maybe the plumbing needs major repairs?
When you’re considering renovations, you might be thinking about painting the walls, putting in new countertops and installing new fixtures. However, flipping requires a lot more than just aesthetics. You’ll need to know if the bones of the property is worth your time and money.
A cheap house in need of a new roof and complete electrical rewiring is, in fact, not a cheap house at all.
The secret to successful house flipping is finding the right house and the right price. Ideally, you would expect 15 percent profit on a good flip. If you’re a novice in the industry, you’ll want to have a realtor helping you through the purchasing (and selling) process.
At Rieger Realty, we can help you find your next home or future investment. Call us at 405.310.2796, and we’ll chat about our current inventory and any options for your next house flip in Norman.