House Flipping looks easy when you are watching a reality show or reading a success story and investors make the process seem simple, probably to encourage others to try it out. No matter what you read or see, you need to move beyond the excitement to consider the actual cost, time, and effort that go into it. House Flipping is an investment like any other that requires full information and strategy.

One way of learning how to make a profit from flipping is learning on the job. This simply means you risk your cash or life savings and redevelop one house to learn how it is done. The alternative way is to gather all the information you can get on house flipping so that you make a smart move. We have compiled the basic tips that every beginner should know before launching into house flipping to make profits.

1. Consider the Cost

One of the realities that you must consider from the beginning is that you will need enough cash to meet the cost of redevelopment. Although the cost varies depending on the property, flipping is costly. However, the high cost should not discourage you. After carrying out the necessary financial evaluations, you can borrow money from your bank or your friends. Some lenders who issue home mortgage loans may be willing to finance the redevelopment.

An alternative way of raising money is to partner with a venture capitalist or any of your connections who has enough cash. You will do the groundwork while your partner funds the venture. You will enjoy half of the profits but you will have more money in your hands for the next venture. The strategy enables you to gain the hands-on experience as well.

2. Develop a Team

One of the important aspects of house flipping, as you will learn, is completing each project fast. You cannot complete any redevelopment and find a good deal in time alone. You need a team of experts especially in real estate to get it done. Your team will help you assess the property and identify all the areas that need to be fixed before reselling.

Some of the professionals that you need on your team include an architect or designer, a contractor, a lawyer, real estate agents and an insurance agent. You also need to work with lenders in case your buyers prefer to take home mortgage loans to buy the redeveloped property.

3. Start with an Undervalued Property

The best place to start is with an undervalued property. Identifying such a property may be difficult but you can reach out directly to sellers. Identify home sellers that most real estate agents have ignored. Use town record data to identify the owners of abandoned properties in your area and contact them.

When you get contact details of property owners, remind them constantly to sell their properties directly to you whenever they are ready to sell. You can also advertise your venture and ask homeowners to sell their ugly properties to you.

4. Compare your Costs and Potential Returns

You cannot go into house flipping before doing some calculations. You need to calculate the After Repair Value (APV) and the Maximum Allowable Offer (MAO) to determine the price you should pay for any building. A real estate agent can help you estimate the value or the price at which you will sell the property after renovating it (APV).

Multiply APV by 70 and then deduct the cost of renovations to obtain MAO, which is the highest price you should pay for the property. You need a qualified contractor to help you estimate the cost of renovations accurately.

5. Understand the Importance of Speed

When you have a good team, money in your hands, and have done the necessary calculations, start working on the property and move as fast as you can. Speed determines your profits in house flipping. If you delay the renovations, the carrying costs such as loan installments, insurance, utilities, and town taxes will continue to accumulate. Your profits will decline as the costs accumulate. Ensure that you have the right team from the start so that you can complete each project fast.

House flipping can be profitable if you do your calculations right and put in all the effort. A rising trend in the housing market does not necessarily mean you will make huge profits. You need to work with a reliable team and minimize costs by completing projects fast to maximize your profits.