Flipping for Profit in Retirement
Buying a house, fixing it up, and selling for a profit — otherwise known as flipping — can be an engaging way to spend retirement, especially if you have handy skills. Of course, there is a significant time and financial commitment involved with house flipping, so fully understanding the process before you dive in is essential. LBR Luxury Beach Realty is home to knowledgeable experts who can advise you on the process and help you find the perfect property to start with.
What Is House Flipping?
House flipping is a real estate investment strategy in which you purchase a property, typically one with minor cosmetic or structural problems, make repairs, then resell it. Of course, you’ll be paying the mortgage, insurance, and utilities during the time you’re making repairs and modifications, which needs to be factored into your expenses and profit margin projections. If you’re in a seller’s market, this can be a smart move. If not, you may end up continuing to pay the mortgage on an empty house for some time.
Look Before You Leap
It’s critical to understand the local real estate market before you get into house flipping. You don’t want to pay too much and be stuck with an overpriced house you can’t resell. You also don’t want to buy a house that has so many problems it will take significant time and investment to repair. According to Bob Vila, homes that need quick and inexpensive surface work are ideal. Have an inspection done before you buy to ensure you’re aware of all of a property’s issues. Consider what you can do yourself, in terms of repairs, and what you need to hire out.
Finding Your Flip
A professional real estate agent can be a real asset when it comes to locating properties that are appropriate for a flip. They’re familiar with local markets, home values, and may even be able to refer you to lenders who specialize in investment property loans. You can also search online yourself. Take into consideration how close you are to the properties you’re looking at. If you’re doing the repair work yourself, buying a property in close proximity to your current residence is advisable, unless you’re willing to travel and stay in a house while you renovate.
Financing Your Flip
Buying a house to flip is much like buying a personal residence. You’ll have to find an appropriate property, make an offer, secure a loan, and make a down payment. It’s wise to shop for rates, and having your loan in place prior to looking at real estate will position you well. According to HSH, you should ask your lender for a letter of preapproval your real estate agent can use in the bidding process. You’ll need to have a solid credit score to get good terms. A knowledgeable lender can help evaluate your financial situation and help you identify the best loan products for your needs. You may even be able to build some repair costs into the loan.
Flipping as a Business
If you’re thinking about house flipping as a business, you might want to have a general contractor on retainer to evaluate a property for you before you purchase it. Setting yourself up as a business entity can also provide some tax relief. Start with a business license and establish yourself as a limited liability company to protect against some forms of liability. If you’re hiring employees to develop and maintain your properties, you will also want to utilize software like this that offers automatic payroll scheduling and direct deposit functions while also automating the tax process.
If you have the knowledge and know-how to gut a house and rebuild it, that’s great. If you’re like most people, you may be more comfortable with cosmetic repairs. The house flipping process can be fun and profitable, but it also has its potential pitfalls as well. Having a good understanding of the market, repairs, and upgrades will position you well.
If you’re looking to buy or sell property in the St. Petersburg, Florida area, LBR Luxury Beach Realty can be an exceptional partner and resource. Reach out today for more information.
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