Over the last few years, house flipping has been extremely popular. Only 5.7 percent of all house sales in 2017 were flipped. That percentage had risen to 7.5 percent in the first quarter of 2020.
Real estate investing is a fantastic way to put your money and skills to use. Unlike most other investments, real estate investing gives you a lot of influence over the decisions that will determine your return on investment (ROI).
As you learn how the industry works, your first several property flips will be very hands-on, high-maintenance investment ventures. There is a steep learning curve, but if you work your way up with increasingly ambitious tasks over time, you will reduce your risk.
The amount of profit you make from house flip deals is determined by your ability to make wise decisions. If you’re just getting started, it’s a good idea to start modestly and with low risk so that your mistakes may be recovered. Consider the first property you purchase as a “lab” for Flipping Houses 101.
On a smaller, entry-level house flip, the actual experience of analyzing the project, forming a team, selecting the proper modifications, collecting finance, and managing the contractors will be more approachable.
Smart investors are starting with the properties that only require minor repairs. The typical improvements made in a lipstick house flip are paint, light fixtures, plumbing fixtures, bathroom faucets and flooring. Any improvements larger than that should’ve already been taken care of by the previous homeowner and their home warranty company.
All of these initiatives are doable for a first-time investor while posing a little risk. But, if a real estate owner wants to boost their profits, what should they do next?
With small-scale flips, many real estate investors have moderate financial success. They look at ways to execute more flips per year to improve their revenues after the first two or three successful ventures of this scale.
While this technique is effective, it also entails more transfer fees, more property searches, and more relocations. Real estate investors who took a risk and entered the sector become complacent and cease dreaming of large earnings.
Beyond what lipstick style rehabs may give, we recommend experienced, successful investors to examine the following ways to generate substantial boosts in a project’s ROI.
It’s time to step up your game and maximize your investment returns! These flipping tactics are only for intermediate to advanced flippers!
It’s time to step up your game and maximize your investment returns!
There are no two businesses that are exactly the same, and expecting even similar enterprises to have the same business plan is unrealistic. Even more significantly, there is no one-size-fits-all business plan for flipping properties that will work for every investor in a given market.
What is successful for one investor may not be successful for another, and vice versa. As an example, there are various approaches to writing a promising business plan. However, no house flipping business plan sample would be complete without the elements below:
1. Marketing And Lead Generation
A section on how to create leads through a suitable marketing approach will be included in every outstanding house flipping company plan. If nothing else, this portion will serve as the basis upon which the rest of the company will be built.
Investors will be able to operate and maintain a funnel of hot leads with the help of a good marketing strategy. It’s worth mentioning, though, that a genuinely successful marketing strategy is the sum of its parts.
Investors should employ a variety of marketing strategies rather than just one. Here’s a list of what has worked for us to get a better picture of what today’s investors are using:
- Direct Mail Promotions
- Bandit Symbols
- Hangers for the doors
- Networking Using Curated Lists Purchased on Craigslist
- Clubs for Real Estate Investing
2. Summary of the Report (Mission Statement)
The executive summary part of a house flipping business plan, as the name suggests, should summarise an investor’s goals in a clear, short mission statement.
The executive summary, perhaps even more specifically, will serve as the foundation for an entire organization; it is the initial impression, and it is what clients will use to determine whether or not they want to engage with a particular company. As a result, every executive summary should clearly outline the company’s mission and long-term objectives.
3. Dynamic Team
Without a good understanding of the team’s dynamics, no rehab strategy is complete. Determine who will hold the most essential roles and when they will be filled.
It is not necessary to recognize every member of the rank and file, but it is necessary to include those who hold the most essential roles. In the team dynamic section, in addition to each person’s title and name, offer a description of the title and why it’s needed.
This section tries to clarify each person’s position moving forward and avoid any misunderstandings about who will be responsible for which tasks. More significantly, the part on team dynamics will ensure that everyone understands what they need to do.
4. SWOT Analysis
An abbreviation for strengths, weaknesses, opportunities, and dangers that a firm faces. A SWOT analysis will assist aspiring real estate investors in identifying the elements that are working in their favor and those that are working against their present business plan. At the very least, success favors those who are well-prepared.
Identifying one’s own strengths and limitations is one of the best ways for a real estate investor to prepare for what’s ahead. Even more significant, a thorough, unbiased SWOT analysis will assist investors in carving out their own niche in the future.
5. Market Research
The primary indications of the area investors wish to work in should be identified in the market study part of a flipping houses business plan.
A market analysis, as the name implies, should provide an in-depth look at what’s going on in the neighborhoods where investors plan to work.
Changes in market share, close competitors, past market shifts, costs, pricing, and everything else deemed crucial to an investor’s performance should all be considered. The more complete a market research is, the better it will assist an investor.
6. Projections And Financing
The greatest tactics, predictably, will include information about a company’s financial prospects. The importance of financial literacy in one’s own business cannot be overstated, and it should be prioritized over virtually everything else in a house flipping business plan template.
Make sure you describe the model you’re going to utilize, as well as any pricing assumptions you drew from the market research. Investors should also specify where they plan to receive their investment and how they will get funds for future agreements. Consider forecasting for at least three years to be safe; this way, investors are less likely to be rudely awakened.
The financing section should also include information on how the investors plan to fund future transactions. Include the sources that will be used, as well as their prices and dates. The more options for funding a business that investors have, the better. The following items should be included in this area, but are not limited to:
- Lenders of Private Funds
- Lenders of Hard Money
- Lenders who work with institutions
- Strategies for Owner Financing
7. Growth Strategy Using Crowdsourcing
Developing a business plan for house flipping will necessitate proactive thinking on the part of investors. More importantly, all house flipping company plans, especially those for new investors, should be prepared with the goal of future expansion in mind.
Scaling a firm might be tough for businesses that aren’t prepared. As a result, it’s a good idea to include a section in your initial rehab strategy that includes any applicable growth ideas. Not in the heat of the moment, but at the start of one’s career, is the optimum time to consider a growth path. The transition will be much easier for those who have been prepared for development from the start.
8. Exit Techniques
Without a section that describes potential departure strategies, no strategy comes even close to being complete. As a result, investors must consider their available options at this stage of the development process.
First, assess the property on its own merits and see if it meets your unique investment objectives. If nothing else, each property has a perfect exit strategy, but it must align with your personal objectives.
To put it another way, you must decide whether you will flip, rehab, wholesale, or rent the asset before purchasing it. Not only that, but you’ll need a contingency plan in case things go wrong.
Getting a fix-and-flip loan and finding the perfect property are both problems when it comes to flipping houses. However, if you can make it all the way through, the experience may be extremely rewarding – both personally and financially. It’s crucial to realize, though, that you don’t have to invent the wheel.
Because you’re flipping your first house doesn’t imply it hasn’t been done already, so take advantage of the resources at your disposal to learn from others’ mistakes.