You may have seen the many TV shows that talk about flipping houses. If so, you may wonder if you should try it yourself. And, since you’re trying it, you may conclude that luxury homes earn the highest profits. So, you might wonder if flipping luxury homes is the best way to go.
If you haven’t seen the TV shows or are unclear about the concept, let’s start with a definition. House flipping begins with buying an old house or one priced below market value. Once you buy the house, you repair everything wrong with it. After sprucing up the home, you then sell the renovated home at a profit. The “flip” is the trade of a poorly valued home for a renovated and desirable home and profit.
1. An Overview of Your Home Flip
The first step in the flipping process is to compose a plan for the project. Begin your first home flip with a look at your available finances. The next step will be to secure additional financing for the house flip. Your funds plus the loan amount will need to be enough to cover every necessary step in the process.
After you have the financial resources, you’ll search for a house to flip. If you’re interested in flipping luxury homes, you’ll need to find a home that can qualify for an extensive upgrade. Complete a thorough inspection and then list all the changes the house needs. After you choose the home, you’ll oversee the repair and decoration phases. Finally, you’ll “stage” the home and put it on the market.
2. The Increase in Luxury Home Flips
The large buy-in price, plus the cost of high-quality materials, may make it difficult to get a large enough loan to finance your flipping project. However, flipping luxury homes is increasingly popular, and more lending institutions are considering hard money loans for luxury properties. They’re aware of the increased public interest in these homes. They will therefore be more likely to give you a substantial loan.
Because of this trend, some realtors have decided to specialize in luxury home sales. These agents are located in upscale neighborhoods and know those areas well. They may even have a list of suitable home prospects for you to consider. These agents will have the expertise to be your guide when making your plans and renovating your luxury home.
3. Begin with a Budget
While you’re in the planning stage, include a prediction of the profit you hope to make. Experts recommend you strive to earn a 10-20% profit when you sell the home. The payoff will come when the sale closes, and all the necessary bills are settled. You can hope for a more substantial profit if you’re flipping luxury homes.
One cost flippers need to remember is the home inspection. This fee averages $400-600 and is paid once you place an offer on a home. This fee may seem costly, but it’s a legal requirement. This inspection will also help you discover all the problems with the home that you must repair.
4. The Importance of the ‘ARV.
‘ARV’ stands for ‘after repair value.’ It estimates the value of the home’s property after you finish all the repairs. Keep this number in mind while figuring out the project’s budget. As your budget takes shape, be sure to add some extra amounts to the estimates for each repair service to ensure you ask for enough money to succeed with the project.
Using the estimated ‘ARV,’ calculate 70% of that figure. Then, subtract the estimated total cost of repairs from that 70% number. The result is the maximum amount for what you should pay for the house. This amount will be a guide for you as you search for a home to flip.
5. Finding the Right House to Flip
Buying the least expensive available house in an upscale neighborhood is a good guideline for choosing a home to flip. If the community has good schools, that will boost your home’s selling price. Another piece of advice is to find a home that mainly needs cosmetic repairs like painting.
Major structural repairs will require a lot of money. On the other hand, if the home only needs paint, floor repair, and some new countertops, you’ll be more likely to turn a significant profit. If you’re flipping luxury homes, a high-quality cosmetic makeover will be a crucial part of the process.
6. Getting a Loan for the Home Flip
When you’re trying to get a loan did the project, you’ll be unlikely to obtain a homeowner’s mortgage. Since you aren’t planning to live in the home, the loan will be considered an investment loan. A ‘hard money loan’ will be preferable to obtain the money you need. These are available through private lenders.
These loans often have a higher interest percentage than home mortgage loans. A hard money loan can often have an interest rate of 8-20%. Therefore, it will be in your best interest to plan to pay off the loan as soon as possible. Every month the loan remains unpaid is will further reduce your profit.
7. After You Buy the House
You’ll begin renovating once you’ve made your flipping plan, secured your loan, and bought the home. Many projects could be needed to bring the house to the condition it will need to reach to be resold. Your home inspector probably told you which features are absolute ‘musts’ on the repair list. In addition to the basics, you’ll also need to beautify the home on the inside and the exterior.
Some flippers are skilled in home repair tasks and can do many of the repairs themselves. You may consider the handiwork as part of your investment. For other projects, you’ll need to hire professionals. If you plan on flipping luxury homes, the appearance of the flipped structure will carry additional importance.
8. You’ll Need Insurance
Even though you won’t live in the home, you’ll need to buy insurance for the home. You’ll use the ARV as the total amount of insurance to purchase. Buying a vacant building policy, a builder’s risk policy, and a general liability umbrella policy would be best. These expenses will further decrease the amount of your profit, but you’ll need to include them in your plan’s budget.
9. Renovating the Exterior
When prospective home buyers come to look at your renovated home, the first thing they’ll notice is the home’s exterior. If the exterior of a flipped home isn’t attractive, the buyer will be less likely to buy the house. If the home has aluminum siding, inspect it to decide if it needs home siding replacement. Siding unifies the appearance of the home’s exterior: and prospective buyers immediately notice its gleaming appearance.
If you’re interested in eco-friendly solutions or want to save money on your power bill, consider installing solar panels. They’re a very efficient way to provide sustainable power and give your roof a modern appearance. Find a solar energy company to install the panels since their installation requires expert work. Anyone flipping luxury homes should seriously consider solar panels.
10. Pay Attention to the Yard
The ideal project should include excellent landscaping if you’re flipping luxury houses. Your budget may not allow the inclusion of a custom landscape but remember: a well-designed landscaping plan raises the property value by a significant percentage. At the minimum, you should ensure the lawn is planted, and its appearance is neat and well-trimmed.
One of the features of an attractive yard is attractive masonry. Whether you have brick or stone fences; or if you design a path, you’ll find that a series of stone structures will lend an air of permanence to your yard. A professional mason can supply the stones or bricks and perform the work; and make your project look sensational.
11. Inside the House
When someone enters the building, they’ll notice the front door’s appearance. If there’s space below the bottom edge of the door, or rust on the hinges, you’ll need a door replacement as part of the project. You may also choose to redo the artistic design of the door – especially if a new door is part of a decorative theme. You’ll also need to decide if the home will need a garage door installation.
When you move your remodeling efforts inside, there are measures to use to ensure the safety of those who will live in the home. As part of your home inspection, please request a mold inspection. If mold builds up on the walls of your home, it will cause an infection and respiratory problems. If the inspection finds mold, pay for a service that will have it removed before completing your renovations.
12. Plumbing and HVAC systems
A very vital part of any home is efficient plumbing fixtures. You’ll need fresh water and toilet facilities. Be sure to contract with one of the local plumbing services to ensure the job will be done safely and fit the overall theme. A licensed plumber will be aware of the local code regulations for plumbing fixtures.
Anyone flipping luxury homes must ensure the house has a comfortable temperature level in every season. You should install an efficient air conditioner and heater. It would be best if you contracted with a professional HVAC company. The person who buys your home will want to be sure the HVAC fixtures are in good working order.
13. The Finishing Touches
A prospective buyer wants a safe, comfortable, and attractive home. When flipping luxury houses, remember that buyers will demand a luxury appearance. The walls, rugs, and fixtures must be fit for a castle. Every part of each room should conform to a theme and convey the spirit of luxury.
Some of the many kitchen features that will impress home buyers is the kitchen countertops. Finding custom countertop installers who professionally install the surfaces of your counters or kitchen islands is an important step in your remodeling plan. To match or complement the new countertops, be sure to find a flooring company that will continue your decorative theme.
14. It’s Time to Sell the House
Once all the repairs are done, and your home looks as majestic as you can make it; it will be time to place the flipped house on the market. Savvy flippers will then ‘stage’ the home – by bringing in furniture and decorating the home as if someone already lives there. The staging will help potential buyers to envision it as a ‘home.’
You’ll need to work with a real estate agent to get your home on the market. They’ll be able to advise you during the selling process. Their support and assistance will be invaluable. Ask friends and family to recommend a reputable real estate agent.
15. More Considerations for Flipping Luxury Homes
Before you begin, you should decide whether you’ll choose to find and flip luxury homes. Why should you put in the extra effort to work with luxury homes? One popular reason is their upscale appearance. A high-end home sale may be featured in the media, attracting additional potential buyers. The higher the price for the home; the more attention the sale may gain.
Luxury homes that are candidates for flipping are likely to be in an upscale neighborhood. Their structure and surrounding property are likely to be of good quality- and require less effort to be ready for resale. Although these properties will have larger buying prices, the profits on these luxury homes are also considerably larger.
16. Use a Speedy Pace
Time is money in flipping homes, as it is in any other business venture. When you make your master plan at the beginning of the project, set as small a timeline as possible. As time goes by, insurance costs will accrue. Once the project begins, interest will pique, and you should conclude the sale as soon as possible to capitalize on that interest.
If you’ve decided to venture into flipping houses, you’re in for an adventure. If you prefer flipping luxury homes, you must keep everything as luxurious as possible. Remember to begin with a good solid plan and oversee every detail with your eye on the profit. If you work hard, you may soon see your dreams come true, and the profits begin to roll in.