Making money flipping houses is a smart investment for those who know what they are doing. But, knowing how to start out and what to avoid makes house flipping tough for many people. Here are some tips for making sure your returns from house flipping stay high.
Go to real estate auctions.
The best way to find a good return for the money you are investing will be to purchase houses at a low price. Your investment is based on making money from the improvements you are performing on the property. This means that your return will be larger if you spend less money on the property in the first place.
Study home improvements.
Different home improvements not only vary in cost, but they will lead to different levels of return as well. Knowing what renovations bring in the most money will be key in choosing what aspects of your properties to spend more money on. For example, if outdoor areas do not sell well in your climate, avoid spending money on outdoor renovations and instead put more money into the indoor renovations such as the kitchen.
Learn your area.
Real estate, as the saying goes, is all about location. Get to know the city you will be working in. Know which areas are more popular and what areas have higher cost homes. Even if you perform great renovations on a property, if that property is in a lower-cost area then it is likely you won’t receive a large return on your investment.
Meet other flippers.
House flipping is an investment, not a competition. Meet other flippers in your area and talk about what does or does not work for your city. These other flippers have already been working in the area and will be able to share that experience and wisdom with you as you begin your work in house flipping. Their advice will save you from costly mistakes that cut into your returns. Even after you have experience under your belt, having a network will allow you to hear about more properties and keep an eye on what the local real estate market is like.
Understand taxes on flipping.
If you perform property flips too often then the IRS will begin treating your transactions as a business. Once they view your work on property flipping as a business then you will be hit with higher tax rates on your real estate sales. These taxes cut into your returns but can easily be avoided with a thorough understanding of the tax laws in your state pertaining to real estate transactions.
Do your own construction.
Renovating your properties can be expensive if you plan on hiring contractors to do the work for you. You can save this money by performing most of the construction yourself. If you are unfamiliar with construction work then you should be sure to study building codes in your area or get the advice of contractors before doing any work. Even if you do not feel confident enough to perform the construction yourself, do your own demolition and small jobs when possible. Cutting out small jobs from your construction plan can save large amounts of money from contractors.
