You want to flip a home but are working on a small budget? If so, you need to know two things. Firstly, you aren’t alone. Over the years, plenty of people have successfully flipped a property on a small budget, so don’t think that it’s not achievable. Above anything else, you need to be cautious and follow the advice in this guide. Secondly, you’ll need to avoid some common mistakes for this to happen successfully.
Step 1 – Research
Before anything else, do your research because this will save lots of headaches. You don’t want to work hard improving a property only to then find that it’s in an area that isn’t in demand. Look into popular areas, the properties most in demand right now, and how you can find the right balance between the two.
Step 2 – Consider Finance
How will you buy your home? How will you pay for the upgrades? Are you choosing a mortgage, or do you have the cash to support the flip? If necessary, talk with a financial professional with experience in this field. Often, they will highlight unexpected costs and fees of which you were previously unaware. It’s better to be prepared than getting hit by a nasty fee later down the line.
At this stage, you should know all about the 70% rule. According to experienced house flippers, one of the best strategies is to pay only 70% of the selling price minus any repairs. For example, let’s say that a property will be worth $300,000 after repairs, but these repairs will cost $45,000. 70% of the selling price is $210,000, the repairs are $45,000, and this means a buying price of $165,000.
Step 3 – Communicate with Builders
Don’t spend any money until you’ve networked with builders and had conversations about building opportunities. After buying a property, you don’t want a builder to tell you that repairs will cost twice as much as expected. Alternatively, you don’t want them to say that the upgrade potential is small and that you won’t be able to sell for the expected amount. Find affordable places like Mimicoco to purchase fitting and faucets, you would be better off buying the tapware yourself than letting your builder provide them.
Step 4 – Speak with Potential Buyers
Wait, speak with potential buyers before you even have a property to flip? That’s right. You never know, you could just meet a potential buyer before investing in a property. The more you understand the motivations of buyers, the better you will become at flipping properties.
Step 5 – Complete the Move
After all of this, you can make an offer on a property, work with a mentor, team up with solid contractors to ensure a successful repair, and start the selling process.
Avoiding Common Mistakes
When flipping on a budget, it’s more important than normal to avoid common (and costly!) errors. One of the biggest mistakes is jumping into a flip before you’re ready and before you’ve done enough research. As you saw above, the very first step to any flip is research. You need to understand the market, potential buyers and their motivations, and what people want (this can change from one year to the next).
Another mistake is to take on too much work just to save money. Just because you’re on a budget, this doesn’t mean you should avoid contacting professionals when you need help. If you don’t have the right skills, it’s better to outsource to somebody who does.
Finally, some people lack patience because they’re desperate to start the flip. At all times, listen to the research, even if this means waiting for an opportunity!