One of the best investments many people make to earn extra cash is house flipping. If you’ve never flipped a house before, there are things you should know to maximize your investment. When learning how to do a house flip, the first factor you’ll want to keep in mind is saving money on repairs. A typical homeowner spends more than $10,000 when doing home renovations.
It’s important to keep in mind that getting plenty of consistent sleep can help you stay more energized throughout the day. Here are professional and personal tips for saving money while flipping houses this year.
Stock Up on Essential Supplies
When learning how to do a house flip right, you’ll need to know how to get the best deals on materials. Buying items ahead of time can save you time and money. Buy fuel in bulk and take advantage of discounts on construction materials. You may want to consider consulting other investors and contractors about where to find materials online. Browse lumber yards and yard sales to find bargains.
Ask contractors and other investors what items are typically needed the most during a house flip. You wouldn’t just walk into auto parts stores and plop down thousands of dollars on random parts. Know what you need ahead of time so you can make the most of your investment. Stock up on the essentials you typically need to get started right away such as paint and landscaping material. Search for coupons and wholesale websites and ask vendors for contractor boxes to save money.
Research the Repairs
One of the biggest concerns with how to do a house flip is the cost for repairs. Some repairs can be done quickly and cheaply, while others may cost you more than you’re planning to spend. Renovating bathroom cabinets is simple and affordable but faulty electrical wiring may be more than you bargained for. Have an inspection done prior to purchase. If major renovations need to be done, you may want to walk away from the deal.
Another thing you’ll want to consider with repairs is your personal skill set. You can save money by doing the repairs and renovation yourself if you know what you’re doing. Consider what you already know how to do and what you’re willing to learn. Certain items such as leaky roofs and handling electrical cable seals should be left to the professionals. Make a list of the projects you’re willing to tackle yourself and items you’ll need to farm out to qualified and licensed contractors.
Build a Network of Experts
Building a team of experts can help you save time and money. Ask people you know and trust for recommendations on contractors, real estate agents, plumbers, electricians, HVAC installers, and roofers. You may want to consider building a database of contractors you can reach out to at a moment’s notice. You can also network and let others know you’re looking for partners by having your own website built by a website design company. You can advertise this website on social media platforms and attract partners willing to work with you.
Many of the top renovation service workers are booked months in advance. If a contractor you want for a project isn’t available, this database can give you other options to turn to. This can save you from expensive delays eating into your renovation budget. Ask renovation service providers for recommendations on who you should include in your list of contacts. You may also want to reach out to custom staffing solutions to help you find team members that perform specific tasks.
Negotiate Commissions With Realtors
Another important factor in how to do a house flip is working with real estate agents. Negotiating their commissions can help keep your budget costs under control. It’s important to establish the best possible relationships with realtors as they can lead you to future house flipping opportunities. You can try to negotiate the house buying or selling transaction in exchange for a flat fee. Some realtors may even be willing to rebate a buy commission for a backend guaranteed listing.
You may want to consider getting a real estate license yourself. This can take considerable time and effort but it could pay off big dividends. You can make commissions yourself on both the buying and selling end of the house flipping transaction. This money can be used to help you boost your renovation efforts for more profits.
Dealing With HVAC Systems
When you’re considering all the factors involved in how to do a house flip, you may want to keep the house’s HVAC system in mind. If the HVAC system is faulty, it could cost you and the future owner quite a bit of money. You can resort to HVAC rentals in an emergency situation, but installing a new system is a more ideal option. Having a home inspection performed will reveal any damages or items that need cleaning. You may just need to pay to have the system cleaned thoroughly to restore it to its optimal performance, which can save you time and money.
Do Research the House Flipping Process
If you want to know how to do a house flip, you should take the time to learn everything you can about the business first. You wouldn’t buy a new car without having it checked out and doing your due diligence. Many people have lost their nest eggs simply because they didn’t prepare themselves for the challenges and obstacles they would face. If you want to figure out how to do a house flip and save money, you need to act like a professional and make serious decisions about your investments.
Negotiate With Your Lender
When working on how to do a house flip, you’re most likely going to need financing to purchase a home and handle expenses. Hard money lenders are highly competitive with one another, which means that their rates will be similar. You may want to consider shopping around because a small percentage difference could save you a lot of money.
You can use the REI/kit flipping software used to determine if a house is a great deal to get a great deal with lenders. The same data used to analyze a property is the same data hard money lenders use in their underwriting. You can use this knowledge to your advantage to give you more negotiating power and achieve better terms with your loan. It will show the lender that you know what you’re doing, which makes their investment in you less risky.
Reduce House Flipping Taxes
Part of knowing how to do a house flip is handling the tax bill that comes along with it. Making sizable profits from your investments means you may face a sizable tax bill at the end of the year. There are things you can do to save money on these taxes. If house flipping is more of a hobby to you, you may want to consider making the property your primary residence to avoid the capital gains tax. You can also save money on taxes by holding the property for more than a year.
If you’re just getting started in growing your house flipping business, you may want to consider doing a 1031 exchange. This will allow you to defer tax liability by using the money from the sale of the property to buy a new property. Make sure you list all of your tax deductions to help you reduce your bill.
Cut Private Mortgage Insurance
If you’re seeking financing to purchase a house to flip, lenders require that you pay for private mortgage insurance if you borrow more than 80% of its value. This coil costs you $1,000 or more, depending on the size of the loan. You can cut out private mortgage insurance by making a 20% or higher down payment. Take what you have saved for a down payment and multiply it by five to get the highest loan amount you can qualify for without having to pay for private mortgage insurance.
When looking at how to do a house flip with financing, you may also want to consider 80/10/20 programs offered by some lenders. This gives you the ability to borrow up to 80% of the primary mortgage without having to pay for private mortgage insurance. You can then borrow another 10% as a second mortgage. In order to qualify, you’ll need a 700 or higher credit score. If you already have a loan with this insurance attached, you can speed up your payments to get to 78% so the lender is forced to drop it.
Hire Cheap Labor for Basic Tasks
Professional construction and roofing companies can be expensive because they have to charge more to cover their own overhead. One way you can save money when it comes to how to do a house flip is to hire cheaper labor. Some of the employees at these companies are always looking for ways to make extra money on the side. You can get the same quality service at a much lower price. Ask around for any employees that might offer moonlighting services and check their reference before hiring.
You may also want to consider hiring student help, especially in the summertime. There are many high school and college students who seek employment opportunities when school isn’t in session. You can post an ad in your local newspaper to hire a few of them for some basic renovation chores. They can mow lawns, clean, paint, and declutter properties.
Buy Time Saving Tools
When it comes to how to do a house flip yourself, you need the right tools for the job. Buying the power tools you need will save you time and money in the long run. You’ll definitely need the typical home renovation tools such as paintbrushes, hammers, screwdrivers, tape measures, pliers, and wrenches. Some power tools you may want to add include a heat gun, cordless drill, power washer, vibrating sander, and a circular saw.
It’s also a good idea to add some sensor tools to your toolbox to help you locate cables, studs, and plumbing pipes. For serious remodeling jobs, you’ll want to have some demolition tools on hand. These include items such as a sledgehammer, crowbar, and voltage tester. Don’t forget to have personal protective equipment as well such as gloves, safety goggles, and a hard hat. By investing in the right tools, you’ll be able to complete projects easier and avoid creating costly damages.
Partner With Another Investor
Working with another investor is a great option to consider when thinking about how to do a house flip and save money. You could potentially cut your costs in half with the right agreement. By sharing expenses, you’ll also take a hit when it comes to making a profit. However, it can be worth it to have extra experience on board, especially if you’re just getting started with house flipping. Make sure you do your research on any potential investment partners first to make sure you are comfortable working together.
Streamline Your House Flipping Timeline
When it comes to how to do a house flip, time is of the essence if you want to make a profit. You’ll want to be prepared to start on the flipping process the moment you close on the property. You can streamline your timeline by securing financing before you find the property you want to flip. Make sure to build relationships with vendors so that they’re ready and willing to help you when needed. Keep the seasons in mind while planning your flip projects because bad weather can wreak havoc on your timeline and cost you money.
When working on how to do a house flip successfully, it’s important to take your time and do thorough research. By making careful decisions, you can protect your investment and boost your profits. House flipping takes a considerable effort, but it can definitely be worth it. Use these tips to save money on your next house flip and achieve your real estate investing goals. Stick to your budget and consider all the ways you can save money so you can put more in your pockets.