House flipping isn’t for the faint of heart, but it may speak to you if you’re looking for something new to do and love a fast-paced schedule. It can be a great way to boost your income, or you might even be able to transform it into a post-retirement career. No matter why you’re interested in house flipping, MRHerrera Financial Ministry shares how to make your venture as successful as possible.
Finding the Right Property
Assessing properties for their renovation potential can be time consuming, but the effort will be well spent when you find a diamond in the rough. Look for a home in an area near parks, shopping centers, libraries, dining options, public transportation, and recreation centers. You should also consider the quality of the neighborhood and public schools. Try to find a home that needs to be fixed up in a neighborhood that is already nice. You can also check how much pristine houses are selling for in the area to determine how much profit you could make with a fixer-upper.
Think about your budget and consider whether the property meets your criteria and if you will be able to pay for all the repairs that are needed. You should have a home inspector take a look at the house before you purchase it, so you know what all needs to be fixed. FlipperForce notes that hiring an inspector will also let you know if there are any expensive repairs that will need to be completed, so it’s worth the investment.
Choosing the Best Financing Option
If you have enough cash saved up, you won’t have to worry about finding financing. But if you don’t have the cash on hand; there are plenty of options out there for house flippers.
It’s possible to get a home equity loan or another line of credit when flipping a house. Other options might include cashing out some of your stocks, using a private lender, or borrowing against a life insurance policy — though this is a riskier choice, according to experts.
If you decide to borrow money from a private lender, you should speak with professional flippers to determine which lenders are trustworthy. Ask other flippers about how quick the turnaround was, what pricing they received, and how responsive the lender was. Properly vetting private lenders will also make it so you don’t end up with any unexpected lender fees.
Organizing Your Payroll
Depending on your previous career, you may know a lot, a little, or next to nothing about general contracting. You may need to hire a contractor to oversee the flip, or perhaps you’re thinking about managing your own subcontractors. Regardless of your plan, unless you intend to do the work yourself, you need to determine how you’re going to pay those who work for you. Consider hiring an accountant, even one who works on a contractual or part-time basis, to go over the books with you. Make sure nothing gets left out, including the tax information when you sell the home.
If you have employees who work under you, determine whether they should be classified as independent contractors or genuine employees of your company. If you’ve formed an LLC or other small corporation, file the necessary paperwork and organize your payroll as well as your employee’s tax information under this structure.
To save time, you can use automated tax forms. Similarly, you can use a payroll app or online service to simplify paying your employees. Certain features will help streamline the payment process, like same-day direct deposit and automated payroll. You can even find payroll software that offers tax penalty protection in case any errors were made.
Flipping houses can be an exciting new hobby for one or two properties, or it may turn into a full-time project as your house flipping skills grow. Learn as much as you can before you begin, ensure that you have the proper financial measures put into place before you hire your contractors, and remember to have fun!