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People everywhere, all around the country, are flipping houses and making a huge profit. It doesn’t just happen overnight, though. Regardless of how easy they make it look on TV, there is considerable thought put into learning how to start a house flipping business.
It’s just not as simple as declaring that you are now open for business, buying an old house, fixing it up, and selling it for lots more than you paid. That’s the way the self-help books and the infomercials make it appear, but the reality is very different.
So, for those who are serious about learning how to start a house flipping business, here are the necessary steps that you need to take.
Like any business, you need to have a clear concept and pathway to success developed before you actually start the venture. Otherwise, you’re just winging it and are doomed to failure. This plan will act as a road map for your business, a guide that includes a clear destination with milestones to reach along the way.
If you intend to seek outside funding to get your business up and running, and make no mistake, you will need start-up capital, then a business plan becomes essential. No investor or financial institution will take you seriously if you don’t have a solid business plan in hand to reassure them that their money will be used appropriately and yield a decent return.
At this point, you will need to determine how you’re going to finance your business. Hard money loans are appropriate for people with lower credit scores or less investing experience. You may qualify for a business line of credit once you’re established. Talk to your lender and decide what’s best for you.
With the business plan in hand and funding secured, it’s time to literally make a name for yourself. Choose a legal structure for your business (sole proprietorship, partnership, corporation, etc.) and register your business with the state in which you plan to operate. Do the research necessary to determine which legal structure is right for you so you can avoid additional fees and paperwork later if you need to restructure.
Obtain the correct business licenses and insurance needed to run and own your own business. You’ll also need to find out what permits and insurance you’ll need for the homes you plan on flipping. If you’ve factored all of this into your business plan, then great! If not, find out what other paperwork you need to finalize before you can purchase your first home to flip.
Finally, set up a bank account for your business so that your working capital stays separate from your personal finances.
If you plan on handling all of the permits, paperwork, purchasing, property buying, property selling, and renovations yourself, then you’re an incredible human being who probably never has time to sleep. If you’re like the rest of us, then you’re going to need to connect with brokers, contractors, and other professionals to help your business thrive.
Ask for references, portfolios, and samples of work when interviewing candidates to join your team. Ask friends and family for referrals. Check out online postings. Find agents with access to the multiple listing service (MLS) if you don’t have it. These are going to be key relationships that you need to succeed, so scour the area for the most reliable professionals in your budget.
A fundamental aspect of how to start a house flipping business is understanding the market that you’re working with. A good house flipper will keep a keen eye on the local market to understand where and when to buy the right property to flip. A great house flipper will work with their network of contacts to target select areas and homes to flip.
Market research will provide you with the necessary background to make swift, good decisions with less risk involved. That means your business stands a much better chance of being profitable sooner.
This is it! All of the research, networking, financing, and planning have led to this moment. Until now, your business has all been theory. Not it’s time to apply everything and actually purchase your first home to flip. With your network behind you and your research in front of you, make your selection, motivate your professionals to make it the best home it can be, and then put it back on the market to sell for a nice profit. You can make use of the free House Flipping Calculator from New Silver to calculate the estimated net profit on your next real estate deal.
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