If you're an avid HGTV watcher, you already know that house flipping is all the rage these days.
If you love design, you're a capable handyperson, and you're interested in a career dealing with real estate, it checks off all the boxes. For many, this is becoming a full-time career route. In fact, in a single flip, some flippers report making as much as $60,000!
This return is right around the average annual income for Americans, which is $61,179.
While house-flipping can be a profitable niche once you begin getting some experience, there are some steps that you'll want to take to get your foot in the door. Keep reading to learn about three ways to get started as a house flipper...
1. Get Your Real Estate License
Technically, you don't have to be a real estate agent to begin flipping houses.
You do have the option of working with a real estate agent who already has a career under their belt, however, earning your real estate license will maximize your profits once you sell the finished property. On average, agents earn a 5-6% commission when they help you sell a property.
The average cost to earn your real estate license is anywhere from $250-1000, depending on where you live. Let's do a little math here...
Say you flip a property that sells for $250,000. The 6% cut your real estate agent earns is around $15,000 for this transaction. When you factor in the cost of materials for flipping the home and the labor, you aren't going to be left with much of a profit after paying that commission fee.
Now, say you flip four $250,000 houses in a year. In one year, you've lost out on $60,000! For many people, that's an entire year's salary.
It doesn't take a math genius to realize that the cost financially and time-wise to get your real estate license will pay off drastically when you get to pocket the commission cost!
2. Set a Budget for the Project
When you don't set a budget for your project, it's easy to overspend as you make updates throughout the house.
If you spend too much money on materials, that's going to cut into your final profit from the flip. So, perform some market research to learn what a local home with your desired features can sell for. Once you've determined this estimate, begin planning the cost of materials for the project, keeping in mind the cost of labor should you choose to hire extra help.
In addition to labor and materials, you'll want to set aside some extra money for any closing costs you may be faced with.
As you're planning your flip, you want to plan your budget with the sale in a way that will leave you with a substantial profit. If you spend too much money on materials and the house sells for less than you expected, you could actually end up losing money!
This is a common mistake that new flippers make, so making a budget will help eliminate this risk.
3. Start Looking for a House to Flip
Once you've earned your license, done some market research, and set your budget, it's time to start setting your plan in motion!
Many first-time flippers take on smaller projects that require fewer intense renovations and more cosmetic touchups. Even if you are handy with home renovations, it's best to start off with the least risk possible since you don't have the cushion of profits from past flips.
Examples of cosmetic touchups that are simple for a new flipper include...
Painting the house (interior and exterior)
Adding new flooring
Painting or replacing kitchen cabinet doors
Updating light fixtures
Adding landscaping elements (bushes, flowers, grass seed, etc.)
Projects that are inexpensive to complete while yielding a high return are going to be your best friend during your first couple of flips. Once you have some experience and profit from a few flips under your belt, you can begin taking on riskier projects!
Are You Ready to Start Your House-Flipping Journey?
It's no secret why house-flipping is gaining traction as a side hustle or even a full-time career for many people.
It offers work flexibility, a great return, and is an interesting project for those who are skilled in renovating or who have an interest in real estate!
While you're eager to become the next Chip and Johanna Gaines, it's important to remember to start small, set a budget, and ease your way into the flipping world.