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By Donna Johnson
Special to the Financial Independence Hub
One of the top ways to make money historically has involved investing in real estate. Buying distressed houses at a good price and then selling them for a profit, known as flipping, is a great option for making money in housing. For those who are young adults, there is time to take risks and recover if they don’t pan out. Flipping houses is one of those calculated risks that could help younger American or Canadian adults achieve financial freedom in relatively short order. Here is how the flipping process works.
Find a house
In order to flip a house, it’s necessary to first own the house. A house that’s ripe for flipping might be a very distressed house in a great neighborhood. With tens of thousands of dollars of work, flippers could theoretically earn a profit that equals or exceeds their initial investment. Even a home that’s merely a bit dated in its decor could provide a good opportunity in the right location.
It’s important to know the market before purchasing a house to flip. It will be difficult to sell a house for a profit in a bad neighborhood no matter how impressive the renovations are. Additionally, comps in the local market will need to be high enough to provide a gap between what the flip initially costs and what you can sell it for. Otherwise, it will be difficult to make a profit.
Have money available
It’s important to have quite a bit of cash on hand before beginning a house flip. Those 3.5% down payments associated with FHA loans [in the U.S.] are only available for homes that will be occupied by the owner. Banks consider flips investment properties. Therefore, a flipper can expect a bank to require a 20% down payment as security for a loan.
Any profit from the flip will have to be in excess of the down payment, closing costs and any interest paid before the flipper can sell the house. Therefore, it’s important to get a great deal before deciding to flip a house.
Assemble a great team
It’s not likely you’ll have every skill needed to buy a home, fix it up and sell it. Therefore, it’s key to assemble a team that has skills you might lack as a flipper. Those with a real estate license might be able to buy and sell houses. However, they could have trouble with some of the renovations. In this instance, having a solid general contractor available who can get the needed renovations were completed in a timely fashion is key. It’s important to remember that time is money in real estate investing so having a good team that can complete projects well in short order is key.
Fix up the house
Flipping a house requires the buyer to actually fix up the house. This could be a complete gut job. It could only require a few strategic upgrades. It’s important to know what the market wants. If a community likes granite countertops, granite countertops will be a good investment. The same goes with a tiled shower stall or even a simple doorbell camera. It’s also a good idea that you ensure any renovations are done well. Shoddy work will make a home less likely to sell.
Why invest as a young person?
It’s quite simple. Young adults tend to have fewer constraints on their time than older adults. Young people are still starting out in life. They may not have spouses, and they are definitely less likely to have children. They also have the advantage of time, not in the sense of having fewer time constraints but in the context of statistically having more life left for investments to compound Another benefit of flipping houses as a young person is the ability to take risks. Those who have families need more money to live. Single young adults can live on less and invest any returns on more flips. Over time, the investments can really start to pile up the profits and add up to a sizable sum.
Investing in real estate as a young person is a great way to start making real money. Flipping houses to sell or rent can bring in a solid cash flow as long as a flipper buys the right property at the right price. With time on their side, young people stand to take the risks necessary to gain the freedom to do what they want by flipping houses.
My name is Donna Jo and I am from Birmingham, Alabama. I love sports (especially softball) and I’m a home security guru. After working many years for a home security company I decided to pursue my lifelong dream of being a writer. That’s what has brought me here today. I hope y’all enjoy my content!
