By Mallory Edens
House flipping sounds simple — and it can be! You buy a property that needs work. You complete the work at a good price and sell the house for an amount more than the original purchase price plus the cost of renovations. However, misconceptions about this type of endeavor stop some seniors from trying it. Learning the reality of flipping can help you understand how you can make a profit with this business. What’s more, flipping houses can be a perfect “encore career” once you’ve retired.
Today, Retirement Estate Advisors & Professionals explains some things about flipping houses that you may not know!
Misconception: You Only Profit If You Put Sweat Equity into the House
Sweat equity is when house flippers do home improvement work themselves, for instance, repainting or redoing the flooring. Many flippers do the work to save money on renovation costs. Older people may be less able to overhaul a fixer-upper personally, though, and that can stop senior buyers.
However, it does not need to! For one thing, little changes can reap tremendous rewards. Decluttering a property, cleaning windows, and repainting the cabinets do wonders for profit potential and don’t require as much physical effort as, say, putting in a bathtub. You can even easily add accent walls using easy-to-apply wallpaper choices that you can custom design.
For another thing, plenty of skilled contractors are happy to work with house flippers for fair prices. Seniors tend to have the money to fund projects. Instead of worrying about sweat equity, many seniors focus on hiring contractors to do the work and flipping more quickly.
Partial Misconception: Flipping Requires a Lot of Money
House flipping does require that you have enough funds to qualify for a mortgage or buy a property outright at low auction or foreclosure prices. You also need funds for insurance, taxes, utilities, and sometimes marketing. That’s basically it, though, as long as you are prepared and motivated.
To reduce costs, start with easier properties. Then, work your way up to more complicated projects. Also, look for free alternatives to premium services and software. For instance, For instance, if you want to advertise your home on Facebook but don’t have cash for a marketing service, create a Facebook ad using a free tool with customizable templates. It’s an easy way to reduce costs and, possibly, pick up a new skill at the same time.
You can also create your own logo using a free design program. The challenge with coming up with an ideal logo is that the combination of graphics and text must convey your values, your meaning, and the ability to provide added value to prospective customers. A logo creator can help you do this quickly. And it’s an easy way to reduce costs and, possibly, pick up a new graphics skill at the same time.
To get a good idea of what mortgage costs to expect and your profit potential on a given home, talk with real estate agents about your area’s housing market. Reports from DS News show that house flipping rates are higher in Ogden, Utah, and Phoenix, Arizona, versus Rochester, New York, and Portland, Oregon.
Partial Misconception: House Flipping Is Too Much Hassle and Takes Too Long
For a single person, flipping can be too much work, at least when major work needs to be done. Fortunately, there are updates and upgrades that are relatively easy to complete. One example is when you’re updating a kitchen; instead of a complete renovation, you can replace cabinet doors, a countertop, put up a new backsplash, or install an affordable wall-mounted range hood over the cooking surface.
Plus, for any scope of work, finding reliable team members is easy. Propy points out that Real estate agents are important alliances to form early on. They can then connect you to contractors, inspectors, and other key players. Depending on your skills and comfort level, it’s possible to put in as little or as much work as you want.
As for the timeline, important factors are how much improvement the house needs and how many people are working on it. The more people involved, the quicker you can complete a project. This approach requires more money upfront to pay multiple workers at the same time, but you can go through more flipped houses.
Misconception: Setting Up a Business Is Too Complicated
It’s straightforward to set up a limited liability company for your house flipping business. You can even do it online. The advantages of going the LLC route include personal asset protection and tax deductions. Some flippers set up a separate LLC for each house flip, so do what works for you. As part of your LLC, you draw up an operating agreement that outlines critical aspects of the business, including who the decision-makers are and the various financial issues at play. Other options include a limited liability partnership and a C corporation.
Hopefully, you now have a better idea of the reality of house flipping. While it does take work and investment, this business may be easier to break into as a senior than you thought.
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