By Yermys Peña
27 Feb 2024, 18:22 PM EST
House flipping is a practice in the real estate industry that involves purchasing a property, usually a house, with the goal of renovating it and selling it quickly for a profit. Investors who are dedicated to house flipping look for opportunities in the real estate market, where they can acquire properties at a lower price, due to their state of deterioration or lack of maintenance.
House flipping has become a growing trend in the United States real estate market. Once the renovation is complete, the property is sold at a higher price, thus generating a profit.
However, not all states in the United States offer the same opportunities and profitability. The most popular for house flipping are California, Florida and Texas.
As experts in construction and experience in home renovations for more than two decades, we recommend that you take into account these possible risks and associated challenges:
-The golden rule: 70%. Calculate the investment amount itself, repair costs and any other maintenance costs. The total amount of that money cannot exceed 70% of the value you will receive when selling the property.
-The investor, called Flipper, will be in charge of purchasing the property and managing the improvements that will make it more attractive and suitable for sale. Attention to detail and property damage assessment must be thorough. In addition, the remodeling must be original and of quality.
-Preliminary work to find good deals includes researching auctions, foreclosures, wholesale sales and the real estate network itself. Choosing a property with a good location will make resale easier.
-It is necessary to have extensive knowledge of the local market to discern between a quick business and a lucrative business.
-The flipper must take into account additional costs such as taxes, sales expenses, those generated by financing and maintenance, in case a quick sale is not achieved. In this regard, the remodeling time must also be calculated.
-In the world of flipping it is crucial to make quick decisions to minimize costs. Once the deal has been closed, a race against time begins. The renovation must be carried out immediately, to put the property on the market as soon as possible. Every day you own the asset involves continued investment and delays your return on investment (ROI).
Yermys Peña is an architect and specialist in smart and sustainable cities. IG @yermyspena – www.yermyspena.com