Opinions expressed by Entrepreneur contributors are their own.
Flipping properties does not have to be complicated. This term refers to properties that are purchased then renovated — or “flipped” — for a profit.
Follow the key tips outlined in the guide below to help you navigate this process and find a quality property to flip and sell.
Related: This Company Aims to Revamp the House-Flipping Process For Both Buyers and Sellers
Finding the right property
To begin, you have to find the right property to flip.
Establish your criteria:
The first step to finding the right property to flip is to come up with a list of criteria based on what is important to you as an investor.
Do you prefer single-family homes, multi-unit properties or condominiums? Based on your budget, how much can you spend on acquiring the property, and what kinds of renovations do you want to carry out?
Having this list will help you determine what criteria are most important to you and will help to narrow down your search.
Understand the market:
Once you’ve decided on what kind of property you want to invest in, investigate potential neighborhoods and markets that work best for you and your investing goals. A property’s location has a substantial impact on what people are willing to pay for it. Neighborhoods that signal potential for a large return on investment often have good school districts, a strong job market or other signs of growth.
Doing your research on the local real estate market is crucial for figuring out which properties are worth flipping. A market’s supply and demand, average time spent on the market and price trends are important to pay attention to, since these criteria usually will signal whether your property will be successful in that market.
Distressed properties like foreclosures, short sales or properties in need of substantial repairs are great for house flippers. You can acquire these properties at a lower rate than normal and spend more on high-value renovations that will give you a higher return on investment. However, be sure to inspect the property and have an idea of how much you will have to spend on the flip itself.
Online listings, auctions and off-market opportunities:
Online platforms, property auctions and off-market opportunities are great ways to find hidden gems in the market. Online platforms include Zillow, Realtor.com or Redfin. These platforms will provide details on the property and have photos, descriptions and relevant prices. They also have filters that can help you narrow down your search based on location, price and other factors.
Auctions will usually feature properties that are being urgently sold and are distressed. Attend a few auctions as an observer before actively participating, since the process can be somewhat overwhelming without prior preparation.
Off-market opportunities come from property owners who are willing to sell directly to you if a quality offer comes through. Use mail or local newspapers to get the attention of homeowners who are considering selling their home. Although this approach requires more effort than other methods, it leads to potentially better deals, and you do not have to deal with as much competition.
Related: How to Make Money Flipping Houses
How to flip properties
Now that you’ve found a potential fixer-upper, you have to navigate the logistics of acquiring and repairing the space.
Acquisition and ownership:
If you are going to flip a property, you have to account for taxes, insurance, title fees and additional acquisition expenses beyond just the asking price. The “70% rule” states that buyers should avoid properties that cost over 70% of the after-repair value (ARV), the estimated value of the property after you flip it, subtracting repair expenses.
Here is a link to a 70% rule calculator if you would like to use your own property and estimate your figures.
Establishing a budget:
Setting a budget is crucial for any home buyer, but it’s especially important when you are planning on flipping the home. Staying on budget ensures that you can turn a profit on the investment while retaining your personal funds.
Most people will aim to make a 10% to 20% profit for each property. Research the average market prices to see what you can reasonably sell your flip for.
Also, it’s smart to invest the money upfront to conduct a full inspection. These inspections typically are around $500 or more, and they will help you understand what kinds of repairs you will need to conduct before you can sell the property. Inspecting the property will help you understand exactly how much work this flip will require and whether it’s a reasonable undertaking for you.
Now that you’ve acquired your property, it’s time to repair and renovate it. Hire a contractor (unless you are one yourself), and start by looking for affordable improvements that can be made to increase value without transforming the entire space. You could repaint instead of replacing the cabinetry, change out old doorknobs and sink hardware, upgrade to energy-efficient appliances or install composite countertops instead of splurging on granite or marble.
Kitchens and bathrooms are typically the most vital spaces to renovate in the home. Also, if you find that you need to replace the flooring in your property, explore hardwood. Buyers are often willing to pay more for properties that have hardwood in them.
Related: 10 Lessons this Entrepreneur Learned from Flipping $100 Million in Real Estate
Marketing your property
Now that you’ve conducted all necessary repairs and renovations, you must market your property effectively so you can get a quick sale.
Make sure that you use high-quality photography and staging since pictures and videos of your property will outperform written descriptions. Investing in a quality photographer is worth it. Also, staging your home with modern and attractive furniture will help potential buyers see themselves in that home.
Leveraging listing platforms using Zillow, Realtor.com and a local Multiple Listing Service platform can help buyers learn more about your property. Highlight renovations and high-value features of your home within the listing to call attention to its best assets.
Finally, be sure to host open houses to give buyers the opportunity to see your home in person. Also, when you see these buyers in person, it can foster an opportunity to connect with them and increase your chances of a sale. Virtual tours can help buyers explore the property interactively from the comfort of their own home. This is convenient for people shopping remotely and planning on relocating to your area.
Hopefully, after absorbing the important information in the guide above, you feel more qualified to flip a property.