Image via Pexels
Starting a House Flipping Business as a Senior
Are you worried about your finances as you get older? Experts recommend having at least seven times your salary saved by the time you turn 55. If you want to have enough savings to retire or even want to come out of retirement, you can try flipping houses. There’s a lot that goes into flipping houses, but when you’re well prepared, it can be an exceptionally rewarding career. So here are some tips and resources from Peak Property Management to get you started.
Do Your Research
First, you should research the market in your area. The values of homes differ greatly by location, and estimates on labor and materials per square foot could vary from state to state. Once you get a general idea, these statistics will help you determine the proper after-repair value (ARV) of any property. In order to make a profit on a fix-and-flip, the ARV value needs to be large enough to cover your expenses and generate revenue.
Flipping houses requires a lot of money. You’ll be paying for down payments, real estate agent fees, construction and renovation, marketing, taxes, and more. In general, build your budget using the 70% rule, which dictates that you should only be paying up to 70% of the ARV minus repairs. When in doubt, overestimate expenses so that you have a buffer in your budget. Your success is dependent on a lot of moving parts that may be out of your control, like construction, timing, and shifts in the market, so having a buffer will help ensure you hit your profit margin.
Avoid Major Renovations
When you’re first starting out, stick to properties that have high resale value. This includes foreclosed homes or homes in need of minor repairs or beautification. Things that look unseemly, like old paint or unkempt lawns, can be fixed easily and have a dramatic effect on the appeal of the property. Houses that have major problems like outdated infrastructure or a crumbling foundation are best avoided, so focus on properties that are structurally sound and have nearby amenities, good schools, and safe neighborhoods.
Shop for Loans
Unless you have sufficient capital, chances are you’ll need a fix-and-flip loan, such as a hard money loan, a construction loan, or a conventional bank loan. In general, you’ll need a solid credit score, a business plan, and an exit strategy to secure a loan at an affordable rate.
Know What Sells
When researching your market, keep a checklist of what’s attractive to buyers. Renovations and new appliances are always key selling points, and prepping your new home with attractive staging can help potential buyers see what their future home could be like. In kitchen areas, focus on practical updates such as adding an island or a new range hood above the stove. These additions provide both utility and value to a buyer. When you’re ready to put your house on the market, consider several negotiation techniques, like pricing down and negotiating up to get multiple, competitive offers in quickly.
Start a Fix-and-Flip Business
Flipping houses as a business owner gives you credibility. With the inherent risk involved in this industry, many fix-and-flippers choose to form LLCs because they’re inexpensive to create and help protect personal assets like property and finances in addition to conferring pass-through tax benefits. It can be challenging to start an LLC without help, so it’s wise to use a formation service. Don’t forget to document your operating agreement, which helps you dictate the organization of your business, profit distribution, closing strategies, and more.
Once you’ve got your business on a firm legal footing, it’s time to create marketing materials. Social media is by far the best way to advertise – and it doesn’t have to break your budget, either. For instance, you can use this free Facebook ad template to reach a huge potential audience, and it has plenty of customizable options as well.
Another step you’ll need to take is investing in software solutions for your business. Unless you plan on doing every bit of work yourself, you’ll be hiring professionals for specific tasks. As such, the process of running your payroll will need to be worked out. Good payroll software can make time tracking and tax withholding easy, allowing you to process payroll on time. Ensuring that your payroll is reliable and timely means contractors will be willing to work with you again and again.
Whether retirement is on the horizon or you want a post-retirement career, flipping houses could be a fulfilling venture. Once you’re equipped with the necess ary knowledge, you can start your new venture.
Peak Property Management offers a wide range of personal services for long-term and short-term residential estate properties. With our many years of experience, we are able to accommodate all of our client’s specific needs. Call 970-688-9004.