Starting your own house flipping business could potentially lead to very profitable returns. But like many businesses, succeeding in this endeavor would require a deeper understanding of the business itself. Here’s a rundown of the most important steps you need to take in order to earn well in house flipping:
Put together your business plan
A business plan is vital in helping you identify and focus on your business goals. Moreover, having a solid business plan also works well when you speak to potential investors. Investors will have a better grasp of your proposals if you have a clear and powerful business plan to present to them. Without a business plan, your investors will likely be quite skeptical about the success of your business in the long run.
When creating a business plan for your house flipping business, the most essential bits and pieces include your goal summary, lead generation scheme, and a market analysis. More importantly, your business plan should also come with a comprehensive business financial plan.
The goal summary should not just clearly itemize your goals. Rather, it should also mention the type of properties you are eyeing to purchase, rehab, and sell; the location you want to focus on; the project deliverables and the people who will be accountable for these tasks; and a project timeline.
The lead generation plan depends on how you want to scale your business and how large your planned operations is going to be. Some of the techniques you may use include, but are not limited to, buying leads and putting up signs, or using online resources.
Your market analysis should include aggregate data about your target clients. It should also include research about real estate price trends and other pertinent information that will help you and your potential investors to understand the market you will be selling to.
Using the goals you have set in your business plan, come up with a business financial plan that would help you achieve these goals. You would need to identify your projected costs and where you plan to get the budget for your business.
Form your team
One of the keys to succeeding in the house flipping business is to make sure you have the right people with you. To this end, you need to form a professional team that knows, understands, and agrees to your business goals. Your team will comprise lawyers, accountants, realtors, and contractors.
If you have a professional pool, it would be easy to form a competitive team. If you are going to put together these professionals from scratch, it would be best to seek referrals to make sure you are hiring right-fit candidates.
Start setting up
Before starting your business, you need to settle a few important things like an office if you’re using one and the type of business you want to set up. With these things out the of the way, the next thing to do is to register your business and start setting up your bank account.
For small-scale operations, an office is not usually necessary. But if you have medium to large scale operations in mind, you might need to have an office space to bring your team together while they work.
Then there’s the task of identifying what type of business you are registering as. The type of business you will choose to be known for will have implications on ownership and tax liabilities, so you have to know how your options differ from one another and which one will be most beneficial to your business.
As soon as you have decided on this, you will need to register your house flipping business with the IRS and have it properly identified as a business entity by getting an employee identification number (EIN). After this, you would need to go to the bank to open an account for your business. Don’t forget to do this step because if you don’t separate your personal account with your business account, your personal and business finances might get mixed up. When this happens, it will be more difficult for you to crunch your numbers come tax season.
Identify the best financing solutions
If your business financial plan was not as comprehensive as it should be, now is the time to make it very specific. In this version of your business financial plan, you should already be able to cite several financing solutions. Simply put, aside from cash how and where do you plan to get more money for purchasing and rehabilitating a home?
You could look into hard money loans because these loans have a quicker turnaround time. You may also consider a home equity line of credit and investment group loans. Again, your best alternatives depend on how much you need and how quickly you plan to rehabilitate and sell a home.
Decide on the property to flip
While putting your business together, you will also need to be clear on the specifics of the property you intend to flip for profit. Aside from the property type, you will also need to look into the size of the property, its location, the amenities offered, and other relevant matters. Identifying and focusing on these specifics will help you create a niche you will be comfortable in, which will also increase your chances of succeeding in the house flipping business.
Purchase, improve, and close
Once you have ticked off the items mentioned above, you are now ready to start working to make a profit. Start purchasing the property you have in mind as soon as you are done inspecting it. Once the home purchase has been finalized, start working your way through home improvement with your team. Keep a close eye on the repairs and the what the home remodeling requires, and start marketing the property once you’re done with the rehab. Marketing a property might take a while but if you were able to identify good leads, you’ll be able to close a sale in no time.
House flipping is potentially lucrative, but only if you have the proper strategies in place. Learn more about house flipping by researching on it and asking the people you know who are also in the business.