If you are interested in taking a stab at the fix and flip industry, flipping houses part time is a great way to get started. In fact, it is a common way to break into the business while continuing to pursue the rest of your life with minimal disruption.
Here is how you can flip houses part time while still making a profit:
Acquire Knowledge About the Industry
Before you consider purchasing your first house to flip, perform extensive research into how the process works. Get a variety of perspectives. There are a wide variety of online services available that are designed to provide you with the skills and knowledge necessary to begin. This is one of the easiest ways to improve your chances of success and feel confident about your first flip.
Another viable option is to seek mentorship from an experienced house flipper. Knowledge from someone with first-hand experience can provide you with insight into avoiding the common mistakes people run into. Speaking with someone who also has experience house flipping part time can give you a clearer idea of if it is right for you.
One of the biggest problems people run into while house flipping part time is running into challenges due to gaps in knowledge. Not having the right know-how can lead to poor decision making and losing out on potential profit. Acquiring the skills and knowledge necessary beforehand can greatly increase your chances of successfully flipping your first house.
We, at Brass Financial have over 30 years of experience in this industry. If we don’t know the answer to your questions, we can usually put you in touch with someone who does. Not only are we your best choice for Fix and Flip financing, but we can be one of your best resources as well!
Know Your Limitations
Being in over your head is one of the worst situations you can find yourself in when flipping houses. Before you commit to a flip, assess your abilities, knowledge and financial situation to prevent becoming overwhelmed with no ability to follow through with the entire flipping process. An unfinished property that you are unable to complete will be much more difficult to sell.
It is important to have a sense of confidence in your abilities as a house flipper, just make sure that you stick to a realistic budget. The time and effort that you will be able to put into the flip is also an important factor. Expect that it could take up to eight months to complete the flip and ensure that you will have time for it in your schedule.
Hire a Project Manager and Contractors
If you have room in your budget, consider hiring a project manager and contractors to perform many of the tasks that you would otherwise need to complete yourself. Doing so will save you a significant amount of time and energy that you could put into your full-time job or other aspects of your life. This is particularly important for part-time fix and flippers.
There can be a significant amount of extensive physical labor that is required in the renovation process. Hiring a team of contractors is a great way to speed up the renovation process without having to use up your time. While it may cost you more than it would if you did it yourself, hiring a team of contractors can be worth it in the long run.
By doing this, you can literally flip homes without ever picking up a hammer!
You may not possess the ability to be on the job site at all times when you hire contractors, and hiring a project manager can ensure that the operation is running efficiently. Your project manager can watch over the renovations and keep you updated if any problems arise.
Reasons to Flip Houses Part Time
There are several reasons why people choose to flip houses part time instead of committing full time.
Some house flippers currently have a full-time job that they enjoy, and are just looking to make some extra income on the side. In these instances, their schedules will often be too busy to flip more than one or two houses at a time.
Starting out in the industry part time is also a great way for people who are new to house flipping to gain experience. People who are just starting out could feel overwhelmed if they try to flip too many houses at once. A slower approach can give you enough time to build up capital, because full time house flipping will require a significant amount of resources.
Organize Your Schedule
Balancing your schedule around work, family and house flipping can be a difficult task that may require some sacrifices. Properly organizing your schedule will ensure that you are putting a sufficient amount of time into each aspect of your life and career.
Use a calendar to keep track of allthe important dates relating to loans and mortgages associated with your property. Set out a timeline for when you will perform the renovation and regularly check up on the property.
Setting realistic goals for yourself while house flipping part time can prevent you from experiencing disappointment and significant financial losses. Understand how much time you can put into house flipping and determine if it is the right choice to fit into your schedule.
Get a Reliable Funding Source
Unless you have a large pile of money sitting around, you will need a reliable funding source. We have written several articles specifically on this topic but here are the key point:
- Fix and Flip loans are specifically designed to fund these types of projects while also providing additional funding for the rehab costs. Terms are favorable (interest-only payments) to help you maximize your profits on the flip. Talk to us to learn more about these loans.
- Traditional banks rarely lend to these types of projects and if they do, your credit score has to be stellar. Furthermore, the time to close is long … which may cause you to miss your window of opportunity for a fix and flip project.
Understand Fix-and-Flip Loans
Fix and Flip loans are designed for the challenges of part time house flipping … tso that you have the funds to purchase your first property and have the capital to complete the renovations. Fix-and-flip loans are an excellent resource that you can use to finance your projects. There are five types of fix and flip loans you can apply for to purchase and renovate a property:
Hard money loan
A hard money loan is the most popular type of fix-and-flip loan that is the most suitable for experienced investors or new investors who are working with a contractor. These loans have lower qualifications for approval, which means that you could receive the funding in as little as 15 days.
Cash-out refinance loan
A cash-out refinance loan is a great choice for investors who are looking to refinance a property, pay off the existing loan and use the money to finance a new property. This type of loan will free up equity for the new property and will typically take 30 to 45 days to receive the approval and funding.
Home equity line of credit
A home equity line of credit works the same way as a credit card. Lenders will issue fix-and-flip investors a line of credit that is based on the value of their existing home and available equity. It will not refinance an entire loan, but it can be used in addition to the existing mortgage. It will typically take between 30 and 45 days to receive the approval and funding.
Investment property line of credit
An investment property line of credit is similar to a home equity line of credit but it is borrowed against an investment property. You will only have to pay interest on the money borrowed, and the money can be used for the purchasing and renovation of a fix and flip property. It will take up to 30 days to receive the approval and funding.
A bridge loan is a temporary loan that can be used during the time between two real estate transactions. The most common use of bridge loans is to purchase a new property before selling an existing one. This type of loan will allow you to pay off a hard money loan while you find permanent financing.
Stay Up to Date on the Market
An aspect people may often overlook when deciding to flip houses part time is the need to stay up to date on the real estate market. So, you will need to set time aside to conduct research on the latest trends and the overall health of the market.
House prices and the real estate market are in a constant state of change. So, spend a sufficient amount of time researching your local market. This will allow you to make informed decisions and avoid common mistakes.
Know the 70 Percent Rule
The 70 percent rule is a common term used in the fix-and-flip industry. It is used to determine what price to pay for a fix-and-flip project to make money. The rule states that an investor should pay 70 percent of what the home is worth after it is fully repaired minus the costs of the repairs and renovations.
Using this rule will provide you with an idea of what to pay for a flip. However, you should never completely rely on it. You need to make sure that all of your estimates for the repairs are accurate for the rule to work.
Negotiations with both lenders and clients can be difficult to maneuver through, and you may not always reach a point of agreement that is in line with the 70 percent rule. Try not to change your investing style if it becomes tough to find deals, because it is much better to make money off of a few deals than losing money on several deals.
Have Appropriate Expectations
With house flipping, what you get out of it is dependent on the amount of effort that you put in. While flipping houses part time is an excellent way to generate some additional income on the side, do not expect to make a fortune.
If you are new to the industry, there is a chance that you will make mistakes during the flipping process. Set aside some room in your budget for these mistakes so that you will be prepared if something goes wrong. Unexpected events such as weather disasters and accidentally damaging renovation materials should be taken into account.
Stay Vigilant During the Process
Getting into the habit of regularly checking on the property you are flipping can help ensure that it is in stable condition and secure. A house that is empty for an extended period of time could be affected by water leaks or vandalism. Regular inspections can lead to the prevention of disasters that could end up taking away from your profits.
If you are hiring contractors for the construction process, it is important to make sure that they are getting the work done in an efficient manner. Do not assume that everything will operate smoothly when you are gone. It is important to check on the process at least once per day or every other day.
Just because you are currently working on a flip does not mean that you should stop looking for new opportunities for the future. Building up a solid inventory of potential houses to flip is an excellent way to continue the growth of your business.
Contact Brass Financial Group
Flipping houses part time is much easier if you have a great partner to count on, and Brass Financial Group can provide you with this assistance. We can handle the mortgage process and allow you to focus on more important tasks. We will provide you with the funds that you need for fix-and-flip loans and mortgages. The application process and approval process is quick and our rate of approval is high. Give us a call at (609) 800-3863 or visit our website at http://brassfinancialgroup.com/ to get in touch with us and learn more about our services.