Opinions expressed by Entrepreneur contributors are their own.
Flipping property doesn't have to be complicated. The term refers to buying a property and then renovating it and “flipping” it for a profit.
Follow the top tips in the guide below to help you navigate this process and find a quality property suitable for resale.
Related: This company aims to reinvent the home resale process for both buyers and sellers
Find the right property
First, you need to find a suitable property to resell.
Establish a baseline:
The first step in finding the right property to resell is to create a list of criteria based on what is important to you as an investor.
Would you prefer a single-family home, an apartment building, or a condo? Depending on your budget, how much can you spend on the property? And what kind of renovations would you like to make?
Having this list will help you decide what criteria are most important to you and narrow down your search.
Understanding the market:
Once you've decided what type of real estate you want to invest in, it's time to research the areas and markets that best suit you and your investment goals. A property's location plays a big role in how much people are willing to pay for it. Areas with the potential for a high return on investment often have good school districts, a strong job market, and other signs of growth.
Researching your local real estate market is important to determine which properties are worth reselling. It's important to pay attention to market supply and demand, average time on the market, and price trends, as these are usually indicators of whether a property will be successful in that market.
Distressed property:
Distressed properties, such as foreclosures, short sales, or properties in need of significant repairs, are perfect for home flippers. These properties can be acquired at lower prices than usual, and by spending more on expensive renovations, you can get a higher return on your investment. However, you should always inspect the property and know how much it will cost to flip it.
Online listings, auctions and off-market opportunities:
Online platforms, real estate auctions, and off-market listings are great for finding hidden gems in the market. Online platforms include Zillow, Realtor.com, and Redfin. These platforms provide property details, photos, descriptions, and associated prices. They also have filters that help you narrow down your search based on location, price, and other factors.
Auctions usually feature properties that are being sold urgently and are in distress. The auction process can be a bit daunting if you aren't prepared in advance, so attend a few auctions as an observer before becoming an active participant.
Off-market listings come from property owners who are willing to sell directly to you if you make a quality offer. Use the mail and local newspapers to get the attention of homeowners who are looking to sell their house. This approach takes more work than other methods, but it can lead to a better deal, and you won't have to deal with as much competition.
Related: How to Make Money Flip Houses
How to resell a property
Once you have identified a property that may need repairs, you must proceed with acquiring the space and arranging for the repairs.
Acquisition and Ownership:
When flipping a property, you need to consider not only the asking price but also taxes, insurance, title fees and other acquisition costs. The “70% rule” states that buyers should avoid properties that are more than 70% of the after repair value (ARV), minus the cost of repairs.
Here's a link to a 70% rule calculator if you want to estimate the numbers using your own property.
Budget development:
Setting a budget is important for any home buyer, but especially if you're planning on flipping a home. Staying within a budget will help you make a profit on your investment while still preserving your personal finances.
Most people aim to make a 10% to 20% profit on each property. Research the average market price to see if you can sell your resale property for a reasonable price.
It's also wise to invest money up front to have a full inspection. These inspections are usually around $500 or more and will help you figure out what repairs need to be made before you sell the property. Inspecting the property will help you understand exactly how much work this resale will require and whether it's a reasonable endeavor for you.
repair:
Now that you've bought your property, it's time to repair and renovate. Hire a contractor (unless you're the one doing the work yourself) and start by looking for affordable upgrades that will add value without remodeling the entire space. You could repaint your cabinets instead of replacing them, swap out old doorknobs or sink hardware, upgrade to energy-efficient appliances, or install composite countertops instead of spending a fortune on granite or marble.
Kitchens and bathrooms are typically the areas of the home that require the most remodeling, and if your home's floors need replacing, consider solid wood as buyers are more likely to be willing to pay a premium for properties that have solid wood in them.
Related: 10 lessons an entrepreneur learned from flipping $100 million in real estate
Real Estate Marketing
Once you have completed all the necessary repairs and renovations, you will need to effectively advertise your property to help it sell quickly.
Property photos and videos are more effective than written descriptions, so be sure to use high-quality photography and staging — it's worth investing in a quality photographer. Also, staging your home with modern, attractive furniture will help potential buyers see themselves living in it.
Leveraging listing platforms with Zillow, Realtor.com, and local Multiple Listing Service platforms can help buyers learn more about your property. Highlight your home’s improvements and valuable features in your listing to draw attention to its best assets.
Finally, be sure to host an open house to give buyers a chance to see your home in person. Meeting these buyers in person also gives you the opportunity to connect with them, increasing the likelihood of a sale. Virtual tours help buyers explore the property interactively from the comfort of their own home, which is convenient for people shopping from afar or planning to relocate to your area.
We hope that after absorbing the important information in the above guide, you will feel more qualified to flip real estate.