Create a Business Plan
Whether you consider house flipping a full-time job or just an extra source of income, one thing is certain: You need to have a business plan set in stone.
A necessary and essential part of any successful business is a business plan, which helps you determine your purpose and keeps you on track. Whether you plan to flip 50 houses during the year or are satisfied with five, a business plan will guarantee that you make the right decisions to help you reach your goals.
If flipping is not your full-time job, rehabbing may just seem like a fun side hustle. But without any direction, this extra source of income can quickly fizzle out. Create a business plan that outlines your strategy, includes your timeline and lays out your financial projections.
If you’ve previously created a business plan, now is the perfect time to review it to see if you are on track strategically and financially. You can make adjustments if necessary, but sticking to your business plan throughout the year will help you become a more successful house flipper.
Set Your Investing Goals
Setting house-flipping goals is essential for your success as an investor. Take some time to write down your goals, as you’ll have a much better chance of reaching them if they are written somewhere you can see them.
A goal can be as simple as flipping 10 houses or making a profit of $50,000 by the end of the year. Make sure your goals are specific and are attainable. Instead of just saying “I want to flip 10 houses this year,” you could instead outline how and when you plan to flip those 10 houses — for example, “I plan to purchase and flip one house each month during this year.”
You will be much more likely to accomplish your goals if you’re specific about how you plan to achieve them.
Determine Your Budget
This step can be difficult, as your budget will vary depending on factors such as your flip’s location, the size of your flip, and the repairs needed. However, laying out a budget will keep you from spending too much money.
When planning our budget, Tarek and I usually start by researching the local market and past trends. Keeping track of a market’s trends from a month ago or six months ago will help you to get a better estimate of how much you’ll be able to sell your flip for when you finish rehabbing.
Your local market research will help you determine an accurate after-repair value (ARV), which will help you figure out how much you can spend on your flip to break even or make a profit.
All of your expenses must be less than the ARV, or you won’t make any money. Figure out the maximum you can spend on rehabbing, and subtract $10,000 from it. This final number should make up your rehab budget, and you should try to stick to that.
Last but not least, make a goal to stay on top of your spending every single day. Flipping is expensive, and you’ll have to expect to spend a good amount of money — but you don’t have to spend all of your money.
Start Looking for Potential Flips
In my mind, it’s never too early to start looking for potential houses to flip. Even if you don’t plan on flipping your first house of the year until March, you never know what deals could come your way before then.
Start searching for homes that could work for you and your business plan. Sometimes it can take months to find a good house to flip, and other times it may only take a couple of days. Depending on your timeline, it might very well be a good idea for you to start looking now.
Don’t let the idea of a new year intimidate you. Instead, use it as an opportunity to start fresh, and do even better than you did last year. The beginning of a new year is the perfect chance for you to get started on the right foot, allowing you to be even more successful than in the past.