Everything You Need to Know About Flipping a House in New Jersey
Flipping houses is not for everyone. Flipping houses specifically in New Jersey has its pros and cons. The lucrative house flipping business is all over T.V., and people are making a killing by buying old houses and fixing them up for a profit. If you are interested in flipping houses you probably know a thing or two about real estate, or are looking for some type of an investment/ side hustle to make. Flipping houses can be a great way to make money in the New Jersey market. This blog post should serve as a general guide to flipping houses, if you have any questions you should call the Michelle Pais Group. We have sold thousands of homes in New Jersey and have worked with tons of different investors, and home flippers in the area.
The disciplined practice of house flipping has multiple steps and plenty of hidden layers that arise once you take on a project. If it is your first time flipping a home start small. You should be very comfortable financially, and not have to stress over the details and budget when you eventually see a great potential flip.
Before you start looking for projects you need to understand the definition of flipping a house. Flipping a house means purchasing a property for one value and then in return selling it for a higher amount. It is your job as an entrepreneur to do so.
Before you start looking for projects of your own you need to figure out what it really takes to flip a house.
What to Know Before You Start Flipping Houses
You need to have a high-level understanding of the different types of flips, or ways to make money in real estate before you try any of this on your own.
But before you venture into this business, you need to know the two main categories that house flips fall under:
Flip
A straight flip is when an investor buys a house that has the potential to be worth more in value after doing necessary repairs and updates. Later, the house is sold at a higher price than what it was bought thus making a profit.
Holding
A hold can be a great way to get a small cash flow or invest in a piece of property with little money down. Finding renters and holding is a solid investment strategy depending on the area and market you are in.
Wholesaling
Wholesaling a house is arguably the cheapest way to start investing in houses and real estate. It is not the easiest, but if you know a great deal it might be a good idea to try and wholesale it if you think it’s possible.
Choosing Which House To Flip
Not to be confused with finding the house itself, but more about how you want to make money on a particular home. Every single home is slightly different. Your decision should be based on making a profit.
How you flip a house depends entirely on your personal situation, as well as the situation with the home itself. Let’s look at the following situations, and how they can possibly flip a house in New Jersey.
Scenario 1
James lives in New Jersey and he found a house to flip. It needs about $50k in work and costs $200k, but houses in the neighborhood have recently sold for well over $350k.
James has a total of $300,000 to do business with.
James’s best choice is to buy the house and fix it up. He has the proper capital and knows the market well enough to make the decision.
Scenario 2
Sharron lives in New Jersey and wants to buy a house to flip. She lives in New Jersey and has a budget of $60k, she qualifies for FHA and would like to own something forever to rent out.
The best way for her to make money in her situation would be to get a multifamily home and rent out part while she lives in the other unit.
Scenario 3
Ronald has been looking for deals for months on the MLS. He is in New Jersey looking to flip a house for profit. He is looking for a project but has little to no money to put down on the house. He could either find another way to raise funds or can wholesale the property and flip it to someone else who is better suited to the project.
Wholesaling is not for rookies but, you can do it with very little money down.
Why Flipping Houses Is a Good Idea
Flipping houses in New Jersey is a great idea due to the sheer amount of inventory available. Flipping houses is a great idea for anyone who is accredited and feels qualified to do so. The majority of the people who do flip houses come from some type of similar field. They could be a construction worker looking to make extra money, or someone who has the money and likes to be a handyman. Flipping a house is a good idea for many reasons. There is not one reason that compels everyone to flip a house, everyone has their own. The goal of flipping any house is to hopefully make a profit. If you take flipping houses very seriously you can make a killing on flipping real estate, if you are not careful you can lose money as well. Every investment you make carries a certain level of risk.
This guide should help you minimize your risk when you finally do invest. This guide is focused on the New Jersey Housing market, however, the guide can help you anywhere you are looking to flip houses.
Where to Look and What to Look For Before You Start Flipping a House in New Jersey
It can be difficult when trying to find a house to flip but it does not imply that you settle for anything that comes your way. That being said, you need to consider some factors before setting out to find an ideal house to flip.
If you are looking for a house to flip you should look for the property in a few places. When you are looking for a piece of property to invest try using the following:
REALTORS
REALTORS are the ones who know the business. Part of their job is keeping up to date with the markets, A great REALTOR knows what makes a good deal on a flip. Having an investment-friendly REALTOR working for you will change the game for the inexperienced investor. Not only do they know about upcoming projects but they know the process.
MLS
The MLS is the holy grail of real estate listings. There are plenty of MLS feeds in America, and we happen to use GSMLS. These multiple listing systems have almost every property that is currently for sale. You should be able to get an idea of the comparable prices and, what is out there in the market.
Local listings
The number of houses in the local listings and not on the MLS is staggering. People who are new to selling a house or do not know how will sometimes list their house for sale by owner on some type of local listing website. Something like Craigslist, Patch, Facebook, or Tapped into. These are often some of the best deals.
Once you have found a property that you think you can flip, You need to make sure you do your due diligence.
The following are important for people to keep in mind once you know you want to buy the property you are ready to flip:
Location
The value of the house you are looking to flip is mostly influenced by the location. This means more than the town it is in, but the neighborhood in that specific town. Location means the world when it comes to a potential flip.
Houses located in areas with negative factors such as airports and highways will have a lower value. Other factors include the type of potential buyers, the parking lot, the neighborhood, and many more.
Condition
The condition means a lot in real estate. The condition of the home is very important to anyone, but especially to someone who flips houses. The condition can be a valuable tool to negotiate or make or break the deal as a whole.
The physical characteristics of the house before the renovation tell you the scope of the project. The scope in our circumstance means how difficult and how much work you would need to do in order to complete the project.
What You Need to Do to Flip a House
This section of this blog post goes into detail step by step on how to actually go about and flip a house. These steps are broken down broadly to provide general knowledge on the subject and the mindset behind flipping a house successfully in New Jersey.
Make a Budget for Your House Flip
Before you buy any type of a project or even begin to look into flipping a house you need to define a budget. Your budget should include everything that you need in order to put the project together from start to finish.
Your budget should include:
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Purchasing the home
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Making any repairs
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Completing projects
When you go to buy a house to flip look for the loose ends, anything that you would need to do make a note so that you can come back to it.
If you do not know the cost of repairs or construction you will need some type of expert to come in and give you a quote. Really shop around with these quotes, and when you find a contractor that you like make sure that they are insured, reputable, and up to code.
Have a bit of a reserve in your budget. Do not try and spend all of your budgets. There are a lot of unforeseen problems when you flip a house, don’t let your budget kill the project.
Invest in Renovations
Renovations are a part of the process of flipping a house. When you walk through a house you need to know what’s worth the investment to fix and pick up as a project.
If you are thinking about creating wonderful homes with beautiful accents that are fit for a king house flipping is not for you. You need to be tactful in your repairs and renovations to make a profit.
Houses are like used cars in a way. A used car can have brand-new tires, but the tires do not necessarily increase the value of the car itself. Houses can have a brand new roof or paved driveway but it will not necessarily be worth the price you pay for that roof.
It is up to you to figure out what the best renovations are for your particular project, this article should help you understand what to fix when you go to flip a house.
Other factors that might help you when flipping a house are your ability to negotiate the repair costs, where you are sourcing your materials, and the time it takes to complete the project. As you continue to flip houses these processes become easier, better, and more profitable for you as the person who flips the house.
Get the Proper Guidance with a Local Expert and or REALTOR
Dealing with a REALTOR is the secret ingredient to making a profit flipping houses in New Jersey. Can you make money house flipping? REALTORS are the ones who know the answer more than anyone, depending on the particular REALTOR an investment-friendly REALTOR could guide you through the process and get you started flipping houses.
REALTORS are the ones who will not only guide you through the process of flipping a house in New Jersey, but they will also close the deal with you. A REALTOR will often more than pay for their services by selling the house for more money than you could alone.
Conclusion
Flipping a house is not for everyone. Flipping a house in New Jersey is typically even harder than in most places to make a profit due to the high taxes. If you are serious about flipping houses you can make a profit in almost any market so long as you know what you are doing. It takes time, and
Questions About Flipping a House in New Jersey
Do You Need to Buy the House Outright in Cash?
You do not need to, but it is highly highly recommended that you do. If you introduce other lending methods you complicate the deal and most likely owe some type of interest or collateral. This will lower your profit margin.
Should I Buy a House Directly From a Bank?
Buying a house directly from the bank is a great idea so long as you are educated on the property itself if there is money owed on the house you need to make sure that the bank is taking care of the leans.
