5 Pro House Flipping Tips for Maximum Profit
The process of flipping houses is more work than it is glamorous. Fix-and-flip and real estate investing, in general, can potentially yield very high returns, but they’re not without dangers.
It’s smart to perform the necessary research before getting a loan or starting to put money into this type of investment. Let’s have a look at some suggestions that should be helpful for a good start.
Consider taking out a DSCR loan
If you aren’t bootstrapping, you might want to consider taking out a loan. However, you should be careful regarding the type of loan you want to get. Let’s see what a DSCR loan has to offer.
Loans based on the Debt Service Coverage Ratio (DSCR) allow the borrower to qualify for a loan based only on the cash flow generated by the investment property rather than on their own income. Either residential or commercial properties may be financed with DSCR loans.
Prior to delving into the details of DSCR loans, it is essential to understand what DSCR is and why it is significant.
The definition of your debt service coverage ratio is the “ratio” of cash available to “serve” your debt. In other words, it is a statistic used to calculate the sum of money you have available to pay the loan’s principal and interest.
The proportion itself compares the annualized net operating income (NOI) of the target property to the yearly mortgage debt service of the target property.
Put your money where it’s worth placing
Almost no millionaire agents operate in low-income areas. In fact, the vast majority live and work in or near the nation’s wealthiest cities.
Rich people relocate frequently. Since the number of transactions an agent can realistically close in a year is relatively fixed, gross commission income (GCI) from selling $1,000,000 properties will be significantly larger than GCI from selling $100,000 homes.
There are notable exceptions, such as Ben Caballero (named the top agent in the country for three consecutive years by Real Trends), but exceptions don’t establish the rule.
The great majority of extremely successful agents on the Real Trends 500 list reside in affluent regions. So, place your money where money is worth placing if you want to multiply it.
Have a professional take care of your books
Realtors who have survived the past two years have quickly learned an important lesson: they should never do their own bookkeeping or taxes. If you do your own bookkeeping or taxes, at best you are leaving money on the table. You may also be in violation of the law.
Unless you want to earn less money or be audited, you have zero justifications for delaying expert assistance with your bookkeeping and taxes.
Fortunately, there is an economical method to obtain this professional assistance. There are numerous software tools and real estate industry specialists that will track your sales and costs, assist you with your taxes, and manage all financial aspects of your business.
Long-term thinking is the way to go
Real estate sales are not a “success-over-night” type of business. You must recognize and accept the fact that you are beginning a marathon, not a sprint.
Before you start, know that the items on this list can help you advance more quickly, but it is still a process. Real estate success requires patience and disciplined effort, so you must be in it for the long haul and not for a fast buck.
Consequently, you must choose your “why.” Knowing your motivation for entering the real estate market will help you maintain focus and achieve your objectives.
You must make it specific. What does success mean for you? Spell it out in great detail and keep a visible reminder of your “why” to keep you motivated at all times.
Track your own performance
Another essential real estate agent tip is to log and measure everything. Tracking and measuring every action requires gathering, analyzing, and comprehending data. This is one of the most significant suggestions for real estate agents since it allows you to make evidence-based decisions.
- How many leads are converting to sales, for example?
- Are your marketing efforts reaching the appropriate demographic?
Through data and analytics, you can track your progress and determine whether your lead conversion or marketing efforts are effective, or if you need to change course to accomplish your objectives.
In today’s environment, data is everything. The better you understand your numbers, the more assurance you can bring to your organization.
Nearly every successful real estate agent takes measured risks. Here, the keyword is measured. Occasionally, extreme risks can pay off in spades. But more often than not, they lead to losses. The point is to remain positive, calm, and patient, playing it smart.