House flipping TV shows have captured the attention of entrepreneurial young people looking for careers in real estate. For some, flipping homes is a way to earn income on the side, while others look to it as a full-time career. Whatever the case, house flipping as a career is a huge investment, and it usually requires quite a bit of your own money up front to get started. Here are a few things to consider prior to buying and flipping your first piece of property.
Get a real estate license.
It’s not a requirement, but obtaining a real estate license can provide you with a lot of knowledge about current and future real estate trends. The material you’ll study to prepare for the exam includes information on disclosure forms, zoning challenges, financing, and homeowners’ association regulations. You’ll also be more familiar with your states’ property taxes, fees, and regulations.
Get accurate information on property listings.
The Multiple Listing Service contains the most up-to-date information about properties for sale and those that have already sold. The only caveat with this program is that, although it’s incredibly reliable, you must be a licensed real estate agent to access the data.
Pick the right real estate market.
Not every market is the right market for house flipping. If you have a smaller budget, buying a home in an upscale, luxury market will make flipping nearly impossible. Most first-timers set their sights on up-and-coming neighborhoods so that their money can go further. Investors often informally categorize neighborhoods by class—a class A ranking represents a wealthy neighborhood, while a class D neighborhood is low-income. Flipping homes in class B and C districts offers the most opportunity and is a lower risk than flipping homes in class A and D.
Create a budgeting plan and stick to it.
Don’t invest until you map out your personal finances. House flipping is a substantial financial investment, and if you need to apply for a business loan, you’ll need to be especially cognizant of your financial obligations. Pay special attention to your credit score and total cash flow to guarantee that you have an alternate source of income for the duration of your house flipping ventures.
Map out a business plan that determines your budget, the number of properties you want to invest in, payment plans, and time frames for project completion.
Build a team and combine your resources.
Flipping houses alone is rare and even unwise. Whoever you partner with should be an asset to your venture and add another skill set—or, perhaps, money. A private investor can contribute not only much-needed funds, but also knowledge and a reliable network of people in the real estate business. Consider partnering with an investor as well as with contractors and design teams. Use their talents for things that are outside of your comfort zone—eventually, you’ll pick up on more skills and have more freedom to do things solo.