Looking to become an East Bay Property Flipper in 2022? According to Realtor.com, demand for housing is expected to remain strong this year. Home sales are projected to grow at a rate of 6.6%, which means 16-year highs for sales both nationwide and in many metro areas. One reason for the strong demand is millennials: 45 million millennials aged 26 to 35 are in the prime age for first-time homebuyers.
Here are the top 12 ways to become an East Bay House Flipper in 2022.
Step 1. Get Your Real Estate License
Having a real estate license isn’t required to be a house flipper but having the license will give you access to more information the average person won’t be privy to. In addition, getting a real estate license includes learning about financing details, zoning challenges, disclosure forms and homeowners’ association regulations. This knowledge can give house flippers a greater understanding of the real estate market and potentially help to determine which opportunities to take advantage of and which deals to avoid.
Step 2: Access the MLS
Here’s another reason to get a real estate license. The Multiple Listing Service (MLS) is a database that provides member real estate brokers and their agents’ exclusive information about properties for sale. Unlike other property listings, the MLS is believed to be verifiable and accurate.
Step 3: Find Houses to Flip
In addition to the MLS, there are several other places to look for houses to flip:
- Facebook Marketplace
- Zillow, Trulia, etc.
- Expired listings
- Seized or foreclosed properties
- Mailing advertisements
Don’t be afraid to think outside the box. Use every available resource to find suitable houses.
Step 4. Get Knowledgeable, Trustworthy Partners
Try as you might, you just can’t know everything about house flipping, nor can you do everything. This is where competent partners come into play. Each partner should have their own unique strengths and qualities that can help the business succeed. For example, one partner may have experience with lending or negotiating while another is proficient in making repairs or renovations.
Step 5: Know Your Market
In many areas, the supply of single-family homes remains tight. For example, in the Bay Area, the unsold inventory index is at 6 weeks, which means it takes less than 90 days to sell homes at current prices. On the other hand, the unsold inventory index for townhouses and condos is 3.6 months. Understanding what’s in demand in your area is key to being successful as a house flipper.
Step 6: Stick to Your Budget
Sticking to a budget is essential for house flipping. However, this could be a challenge: prices on bricks, roofing materials, drywall, flooring, and other home construction items have all increased due to inflation.
The rule for house-flipping is to follow the 70% rule: don’t buy a house for more than 70% of what you believe you can sell for. Fortunately, housing prices in many Bay Area communities are expected to increase over the next 12 months (partly due to low inventory).
Step 7. Get the Proper Financing
After you set your budget, secure the financing you need to complete the flip. In addition, make sure you give yourself a cushion for any unexpected expenses or hidden costs.
Step 8. Know Your Business Costs
Profits from house flipping can be eaten up by both real and hidden costs. For example, there could be fees incurred while owning the home before it is sold. Here are some of the costs and fees that must be taken into consideration:
- Acquisition costs (attorney’s fees, credit report, hazard insurance, appraisal fees, loan application fees, closing costs, etc.)
- Property taxes
- Lawn maintenance
- Mortgage payments
- Homeowners insurance
Step 9. Don’t Overlook the “Ugly Ducklings”
Many properties will require some renovations (some more than others). Instead of focusing on how it looks right currently, envision the finished product. Many of these homes can be transformed and allow for a healthy profit once upgraded.
Step 10. Be Ready To Renovate
Renovating homes is key to house flipping. Here are a few ways to keep costs down during this critical stage:
- Create a budget and stick to it
- Fix only what’s necessary
- Update walls, ceilings, and floors
- Reuse materials or buy used or salvaged materials from other house flippers when possible
- Stick with basic designs (let the new owners make radical changes)
- Take bids from several contractors to get the best offer
- Once you find a good contractor, keep working with them (build relationships)
Step 11. Make Frequent Visits to the Job Site
This is to simply make sure work is being completed in a timely manner by the contractors. (The longer you hold onto a house, the more costs you could incur). In addition, if there are any problems or something isn’t being done to your liking, it can be quickly nipped in the bud.
Step 12. Err on the Side of Caution
Unfortunately, some renovations can be more time-consuming than anticipated. Homes can take longer to sell than you thought. A repair could cost more than budgeted for. Factoring for these and other surprises is key.
Putting It All Together As East Bay Property Flipper
While inventory for housing is still low and demand is strong, many are still nervously watching the real estate market, unsure what will happen next. However, having a solid game plan and a strong team can increase your chances of being a successful house flipper in 2022 and beyond.
Are you a house flipper or looking to get started? Range Homes is here to help. We have friendly, professional agents ready to help you reach your real estate goals. Contact us HERE for all your real estate needs.