By now, you know what house flipping is. You buy a property at one particular price point, and then you make repairs and upgrades to it that will make it more valuable, allowing you to sell it for a profit.
If you’re thinking about flipping homes as a real estate investor in Roseville, we recommend that you spend some time studying the market and making strategic plans that will allow you to reap more of the rewards and fewer of the risks that often come with this sort of real estate transaction.
A lot of investors have asked if it’s still possible to earn a profit on flipping homes. It is, although the process requires a lot of attention to detail. On average, people flipping homes can make 10 to 20 percent profit on the after-repair value of the property they invested in to flip. With mortgage rates Iikely to drop at some point this year, and a growing sense that inflation is slowing down while the economy grows, most experts believe that the market will be strong and able to support investors who want to flip homes.
We’re going to take a look at the advantages and the challenges of flipping homes in Roseville so you can make an informed decision as you determine what type of investing makes the most sense for you right now.
Flipping Homes in Roseville: Is it Profitable?
The idea of flipping real estate is attractive because of its income potential. However, the profit part isn’t guaranteed. And, there’s often more work involved than people realize.
Home flipping is not as popular as it once was. But, there are still investors who are doing it successfully, and there’s always opportunity – no matter what kind of market we happen to be in. You have to be informed. You have to be surrounded by experts.
What you earn will depend on the property you’re working with and the way you structured your investment. Your profits will be calculated by subtracting the median purchase price from the median resale price. Investment results are never guaranteed. Do your research – especially your math.
Tips to Flipping a Roseville Investment Property
Most real estate experts will warn you not to try flipping a property without surrounding yourself with people who have done it successfully before. Create your network. Determine where your skills are lacking, and be willing to fill in the gaps. You will need a contractor. You’ll need a real estate agent to help you earn as much as possible once the work is done. If you’re planning to rent the property out, you’ll want to work with a Roseville property manager as early in the process as possible, so you can determine how much rent you’re likely to earn and what kind of tenants you’re likely to attract.
Don’t cut corners. Pull the necessary permits. Work with professionals who are licensed and insured.
- Create a Budget
Budget not only for the property purchase but also the repairs, fees, and the unexpected costs that will undoubtedly pop up. This is a big part of your success, but it’s not always easy to determine what you’ll be spending. Industry experts recommend that you budget based on the 70 percent rule, which says that you should not pay more than 70 percent of the after repair value, less any repairs that you’re flipping. If the math doesn’t give you that percentage, you may not be choosing the right property to flip.
- Decide on Financing
You’ll have to determine how you plan to pay for your property. While paying for the purchase in cash will give you the best ROI, Roseville real estate is pricey, and you’ll likely need a loan. Consider a hard money loan for flips. This is a short-term loan that has a higher interest rate but more flexible terms. Some investors find them risky, but you can make them work as long as you pay off the loan within a year or two.
- Select the Right Property
Choosing the right property is going to make a big difference in what you can earn flipping homes. Look for a property that’s generally well-maintained but woefully outdated. This gives you the opportunity to make mostly cosmetic upgrades rather than major rehab work.
- Estimate the Renovation Time
You’ll have to budget more than money. You’ll also have to budget time. You’ll need to coordinate a number of contractors and service providers. Make sure you’re scheduling those plumbers, electricians, roofers, and other experts ahead of time. You want to have everyone in place as soon as you close so there’s no time wasted on the renovation part of this process.
Where to Focus Flip Upgrades
What type of work should you do to ensure you’re earning as much return on your investment as possible?
This will depend on the property you buy. The National Association of Realtors released a report recently that said the best renovations for the highest values include:
- Bathroom remodels (71 percent ROI)
- Kitchen remodels (75 percent ROI)
- Flooring (147 percent ROI)
The lesson here? Tear out that carpet and invest in hardwood floors. Make sure the kitchens and the bathrooms are especially modern and new.
Challenges in Flipping Roseville Homes
As you can see, there are multiple benefits and a lot of opportunity for profit, even in a market that’s expensive and competitive. You need to be prepared for the challenges as well as the rewards if you’re thinking about doing this.
First, repairs are likely to be expensive. You’ll need to price them out before you even purchase a property because material and labor costs have risen dramatically in the last four years. Supply chain issues have more or less been resolved, but there’s still a lot of demand for this type of work, and many of your most trusted contractors may be struggling to keep up with the workload. That means you’re potentially paying more and waiting longer. There’s plenty of new construction, keeping costs high. This can be a challenge when you’re renovating and flipping.
There are also logistics, which can be frustrating. Waiting on the permits you need. Discovering problems within the structure of the house that you didn’t know were waiting for you.
There’s money to be made flipping houses. Make sure you surround yourself with experts, and always over-plan. We can help. Contact us at Action Properties before you get started.
