Flipping houses can be a path to wealth if you play your cards right, but it can also result in money pits and small returns if you don't know what you're doing. Before you get ready to flip your first house, make sure you're considering (and finding answers to) all of the following questions.
What’s your upper limit on purchase price?
There’s always a cap to any sales price you can get
A flip will always need at least some work
This means you need to find an amazing deal to make money
How will you find the best deals?
Divorce court
Probate court
Foreclosed homes
Look for homes that are sound but need cosmetic work
No major repairs: plumbing, electrical, foundation
Should you get an inspection?
Even if you’re paying cash, it’s a good idea
Ask the inspector to focus on major issues
Get a sense for outdated or noncompliant features or systems
Which improvements can you tackle personally?
Hanging drywall
Painting
Installing cabinetry
Nothing?
Who's going to help you?
What improvements can’t you handle?
Look for people to fill the gaps
Ask about rates and availability
Pay them on time
Maintain good relationships
What's your timeframe?
This will depend on what needs to be done
Build in time for each task plus wiggle room
Bad weather
Missing supplies
Illness
Does the market matter?
Markets with robust price growth tend to yield low returns, but ...
Try to find markets where homes are moving more or less quickly
What will you do to balance your portfolio?
Successful flippers diversify their real estate investments
Will you venture into becoming a buy-and-hold landlord?
Will you offer lease options to renters?
This way, a bad flip won’t sink you
Can you juggle multiple deals at once?
You’re only as good as your next deal
You’ll to line up the next project while you wrap your current flip
Can you think like an investor instead of a homeowner?
Don’t get carried away with upgrades
Use materials that are classic and long-lasting
Offer wide appeal without sacrificing much quality