If you managed to turn a property in shambles into a luxurious abode for you and your family to live in, you might be thinking you can start doing it as a business.
After all, buying an unattractive property at a low cost and improving it to a point where families would pay good money to move into it should be easy, right?
Well, not entirely.
Even though you may have raw talent in improving homes, a natural knack for design, and a good eye for spotting the hidden potential in properties sold at a deal, there are still a lot of skills you have to acquire before you can begin making a business out of flipping houses.
So before you line up for that big-ticket credit line, ask yourself the following questions to find out if you are ready to turn your home improvement hobby into a full-fledged house-flipping business.
How much do I know about real estate investing?
Do you know the difference between active and passive real estate investing? Do you know what real estate investor resources and tools you can tap once you decide to dive into this line of business? If not, then you have your work cut out for you.
Just like in any other field, you have to have a deep understanding of how things in the industry work before you formally join in. At the very least, you have to acquire a mastery of the language and tools real estate investors use, as well as any laws and regulations that affect business in your area.
Knowing how long it usually takes to flip and sell a house, how much investment is usually required, and the rate of return you can expect on your investment will allow you to come up with a comprehensive and effective business plan for your venture.
What do I know about appraising property value?
The most difficult part of running a house-flipping business is not actually the renovation and repair work — it’s learning how to identify good investments and differentiating them from properties that are unlikely to turn a profit for you even after a complete renovation.
After finding an ideal location where you can flip houses and lock in a target property, you have to immediately conduct a thorough walkthrough to find out if the purchase price leaves you with enough margin to make a profit after repairs and maintenance costs.
Keep in mind that house-flipping is a high capital business, so you don’t really have much wiggle room for classic trial-and-error. You have to be sure that every property you invest in will pay off.
Do I have trusted contractors?
Whether you like it or not, there are simply some projects you can’t fully DIY. For houses that require foundational repairs and extensive upgrade work, you need the best contractors working with you.
With any luck, you might already have a network of trusted professionals you built when you worked at your own fixer-upper. If not, then you might want to start boosting your contacts list by seeking referrals from people whose opinions you can trust.
Keep in mind that the quality of your contractors’ work will ultimately reflect on the reputation of your business. Only hire people who have a long history of quality work.
Do I have the time to oversee flipping operations?
Even when you are working with contractors you fully trust, you still have to be hands-on in the business operations. It’s always good to have an extra pair of eyes double-checking every aspect of the work being done.
This way, you can easily identify and address problems and bottlenecks in the flipping process, especially if you are working within a tight timeline for the project.
As with any other business, it pays to be familiar with all the working parts of your operations. Make sure you have enough time to manage the business if you really want it to succeed.
How much money can I invest?
This is probably the most important question you have to ask yourself before jumping into full business owner mode. Sure, there are credit lines and funding opportunities that can help you with larger purchases, but you will definitely still have to shell out cold cash for certain parts of the business, like overhead expenses and payment of labor costs.
Not to say, however, that you can’t start the business if you have less than $100,000 in the bank… It only means you have to look for properties that are on the lower end of the price spectrum. You can always move up to more premium properties and pricier investments once you have made a couple of successful low-cost sales.
Do I know any realtors?
The proof of the pudding in house flipping is in the selling. An experienced realtor can speed up this process for you, especially if you don’t have all the time in the world to organize open houses and private viewings of the property.
You might get away with finding buyers on your own at first, but when you start scaling up the business and are working on several investments at once, a realtor will be indispensable for the business.
Once you’ve answered all the questions on this list, the only thing left for you to do is ask one final question, and this is a big one: Are you ready to turn your love of home improvement from a hobby to a lucrative business?
