If you’ve seen one of the many house flipping shows that are on TV these days, like Flip or Flop, you may have caught the house flipping bug. On TV, they make it look easy. They purchase a property, fix what’s broken, turn a dump into a dream home, and walk away with a six-figure profit in just 60 minutes.
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What does it take to be a successful house flipper? Well, a fat bank account and generous lines of credit certainly don’t hurt.
But what about the personal attributes? There’s more to house flipping than just purchasing ramshackle homes and renovating them for big profits. There are personal skills and attitudes that are vitally critical to the process. Let’s take a look at a few of those qualities.
You Need to Be a Risk Taker
No matter what you see on TV, or read in how-to-get-rich books, flipping houses involves a tremendous amount of risk. You need to have the type of temperament that’s comfortable taking that risk on. And you need that not just as a general personality trait, but regarding each specific deal that you enter.
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There are all kinds of risks connected with house flipping. The first is that you may not be able to sell the property and make a profit. You may even lose money. This can happen either when you pay too much for the property initially, underestimate the repairs required, or run into a major unexpected problem that you haven’t budgeted for.
The second is that you might get caught in a market downdraft, and be unable to sell the property quickly. The problem here is that your money will be tied up in one property, leaving you unable to move on to the next deal.
There’s a workaround for each of those situations, but you have to have the appetite for risk that they require.
You Need Hands-on Renovation Skills
House flipping is not an armchair venture. If you are going to sub-out all of the work to professional contractors, you could go broke renovating a property. You’ll have to have the ability to perform at least some of the renovation work yourself.
That can be a single skill, such as plumbing or electrical work, or it can be general skills, that enable you to perform a little bit of each job. The more work you can do yourself, the less it will cost you for contractors. And that will affect your profit on each flip.
You Need an Eye for a Bargain
It’s probably true that the single most important step in a successful flip is getting a property for the right price. That means getting it well below market value. The price will have to be low enough to cover your renovation expenses and provide you with a generous profit.
You’ll also need to be able to get renovations completed inexpensively. In addition to being able to perform much of the work yourself, you’ll also have to be working with contractors who won’t gouge you on price. As well, you have to be fully capable of getting any necessary construction materials inexpensively. This is all about keeping your renovation costs to an absolute minimum.
You Need an Intimate Knowledge of the Local Real Estate Market
To be able to get a bargain on the house that you will purchase, you will have to have a thorough knowledge of the local real estate market. It can take years to acquire that knowledge. Prices can vary significantly from one community or ZIP Code to another, or even between neighborhoods within the same community. You will have to fully understand those price variances.
You can work with local real estate agents and appraisers, but there’s no substitute for knowing as much about the local market as possible. That’s the only way that you’ll be able to make an informed decision that will lead you to buy a property that can be flipped profitably.
You Need the Patience of a Saint – Sometimes
Patience will be necessary when it comes to finding the right property to flip. Buy the wrong property, and you’ll lose money. You’ll have to have the patience to take as long as necessary to find the right ones.
But once you purchase the property, your patience will need to run out.
Speed in turning over properties will be critical. That’s because each property you purchase will become a capital trap. You will have money invested in the purchase of the property itself, as well as the renovations. But you will also have property taxes, debt service, insurance and utilities along the way. The longer that you hold a specific property, the more it will cut into your profits.
So, it’s patience on the way it, and a lack of patience on the way out. Take your time finding the right deal, but then be ready to move quickly once you do.
You Need a Definite Creative Streak
There’s no one-size-fits-all when it comes to property flips. Each property is unique, right down to its deficiencies. You’ll have to have the ability to look at a property and know what needs to be done to bring it up to a premium price level.
The best properties for flipping are those that have been neglected for many years. You’ll have to find a way to reverse that trend, to the point of even making that property more desirable than others in the neighborhood. That will not only help you to increase the value of the property, but also the speed at which you will sell it.
As you can see, there’s a lot more to house flipping than having cash and generous lines of credit. Sure, you need both. But you also need those “soft skills” that can be the difference between success and failure.