Casafina April 13, 2022 1 Comment


What Is House Flipping?

House flipping is when a real estate investor buys houses and then sells them for a profit. In order for a house to be considered a flip, it must be bought with the intention of quickly reselling. The time between the purchase and the sale often ranges from a couple of months to a year.

There are two different types of house flipping:

1. Fix and Flip: An investor buys a property that has the potential to increase in value with the right repairs and updates. After completing the work, they make money from selling the house for a much higher price than what they purchased it for.

2. Hoard and Flip: An investor buys a property in a market with rapidly rising home values. They make no updates, after holding the property for a few months, they resell it at a higher price and make a profit.

Is Flipping a House Profitable?

Flipping houses may sound simple, but it鈥檚 not as easy as it looks. Logically, a house flip can either be a dream or a disaster. If done the right way, a house flip can be incredibly profitable.

What Is the 70% Rule?

The 70% rule means that the purchase price of a property should be 70% of its after-repair value minus renovation and repair costs. This helps you avoid overspending on a property that will give you little return on your investment. Here鈥檚 how that looks:

Let鈥檚 say you estimate a house鈥檚 after-repair value to be 300,000 Naira. Start by multiplying 300,000 by 70% or 0.7.

300,000 x 0.7 = 210,000

Now, let鈥檚 say it needs 50,000 Naira for repairs. To figure out the max price you should pay for the house, subtract 50,000 Naira from 210,000 Naira.

210,000 – 50,000 = 160,000

That means the purchase price of the house should not be more than 160,000 Naira because that leaves you making a 90,000 Naira profit when you sell the house for its after-repair value at 300,000 Naira.

So how exactly do you make money from buying houses, renovating them, and then selling them later on? Start by keeping these best practices firmly in mind.

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Best Practices for Making Money Through House Flipping.

1.聽Make Sure you have enough money for the Investment

The main idea behind flipping a house is to buy a relatively affordable property, renovate, then sell it for a profit. If you do not have enough money, you won’t be able to buy the house you want to use for the investment.

Before doing anything, confirm the amount of money you have saved up in the bank. You can do this easily by checking your account balance on your phone or visiting your bank. [W1]聽

2.聽Invest in Standard Houses

The housing market offers a wide range of property options, from studio apartments to single-family houses to 3 to[W2] 聽5-bedroom houses. How do you decide which of these you should go for? The answer to that question depends on your capital, experience in the house flipping industry, and loads of market research. If you are a beginner, a good approach is to go for standard houses as there will be enough demand for that or you聽reach out to an investment advisor to guide you through.聽

A standard house would have 3 to 4 bedrooms, it is great for a small to medium-sized family (about 1,200-2,000 square feet), and has an entry-level price tag (Which will vary depending on the area). The idea here is to find a property that you won鈥檛 find difficult to flip later on. Also, make sure you go for a house that won鈥檛 sink your budget during renovations.

3.聽Find a Profitable Location聽

One major thing you should keep in mind when fixing and flipping homes is that, you can increase a house鈥檚 value but it will be more difficult to improve its neighborhood. Therefore, always research the locations of any property you are considering to maximize return on investment.

A few things to check are how much your chosen house types are selling in the area and how fast they are being taken off the market. It is also a good idea to choose locations that are near you if you鈥檙e still a beginner at this. That way, you don鈥檛 overextend yourself when doing your research.

4.Research and Analyze Market Data

Assess your property options as carefully as possible. Do your due diligence, gather all of the important data and make informed decisions. Do a risk vs reward analysis. Deep dive into the costs of refurbishment in order to avoid costly surprises and mistakes later on.

It is also imperative to take advantage of home inspection services. When you buy a house for flipping, it should only need cosmetic upgrades to maximize profits. A house inspection can expose potential money pits hidden behind the walls.

You should also do research into market trends. See which home upgrades people are more willing to spend money on. Factor in the data from your neighborhood analysis as well. For example, will there be new constructions in the area that will raise or perhaps lower the value of your investment property? By looking into these matters, you will be more aware of what you鈥檙e getting into and, hopefully, avoid biting more than you can chew.聽click here to learn more

5.聽Buy and Renovate the House with the Help of an Excellent Team

House flipping is all about working with the right people. You can do your market research by yourself, but once you start the process of buying an investment property, you will have to work with other professionals. Be prepared to deal with realtors and lawyers.聽

Once you are ready to start the renovations, you will need to find great contractors and builders. So, find the perfect team for you. Make sure to vet any professional you decide to work with. Check their portfolio and see what their past clients are saying about them. By ensuring that you are working聽with a good team, you minimize unwanted stress and expenses.聽

6.聽Flip the House as Quickly as Possible

The longer your investment property stays on the market, the more expensive it will get for you. After all, you鈥檒l have to pay for its maintenance and utility bills while it is still under your name. So, it is important to work with a realtor to market your renovated house as effectively as possible. A quick sale should be your primary goal at this point for maximum profits.聽Casafina Development聽is qualified for this, they are the most reliable real estate company in Nigeria.

Are You Ready to Flip Houses?

There鈥檚 no doubt that flipping houses are risky. If you make smart decisions, you can make a lot of money flipping. But you can also lose everything if you make a bad investment.

Have you ever flipped a house? What was your experience like? What do you wish you had done differently?

1 Comment

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    August 3, 2022

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