Investing in real estate has become synonymous with today’s greatest wealth-building strategies. House flipping, in particular, continues to offer investors of every level lucrative opportunities, and the Kentucky real estate market appears to be brimming with enough potential to keep up with demand. Whereas most markets have seen activity slow, pending sales in Kentucky are occurring about 53% faster than the national average—13 days and 20 days, respectively.
The Kentucky real estate market is setting the pace for national activity, and investors are starting to take notice. As a result, there may be no better time than today to know how to flip houses in Kentucky.
Experienced house flippers are already making profits in the Kentucky housing market, and there’s no reason our guide can’t teach you everything you need to know to do the same. This guide will tell you the most critical steps to take when learning how to flip houses in Kentucky for the first time, including:
Flipping houses is a common real estate investing strategy to generate short-term profits. Otherwise known as rehabbing, house flipping is exactly what it sounds like. House flippers will purchase real estate to improve it and resell it for more. The term “flipping” refers to the speed at which the strategy is executed, as investors are flipping the property from one owner to another in quick succession.
To be clear, flipping houses is more nuanced than buying and selling. In particular, investors are tasked with increasing profit margins at every step along the way; that means it’s imperative to buy low and sell high. In doing so, investors typically buy a property below market value whose owners are motivated enough to sell at a discount. Next, investors will fix and rehab the property to increase its value and maximize their return on investment (ROI). Ultimately, the goal is to sell the property for more than the total amount invested.
Of course, there’s more to learning how to flip houses in Kentucky than that, but we’ll get into that later. First, let’s look at some statistics that make Kentucky a great place to invest.
Read Also: How To Invest In Real Estate: The Ultimate Guide
Anyone who learns how to flip houses in the Bluegrass State is only as good as the data they have to work with. As a result, aspiring investors must prioritize today’s most trusted stats and market data. The crucial stats investors need to know include the following:
*All Kentucky housing market statistics are as of the second quarter of 2023.
Learning how to flip houses in Kentucky doesn’t need to be as intimidating as many new investors make it out to be. Our 7-step guide can simplify the process and make it more approachable. Anyone interested in learning how to flip houses in Kentucky must follow the guidelines outlined below:
There may be no better place to start learning how to flip houses in Kentucky than with a mentor. Collaborating with and learning from someone who has already accomplished the same thing you are looking to achieve is invaluable. A great mentor can simultaneously provide insight, unwavering support, and guidance in a complex industry. A good mentor will allow you to learn from your mistakes and most likely prevent you from making costly mistakes. That said, not all mentors are created equal. Anyone looking for a mentor in Kentucky needs to vet candidates accordingly.
While some mentors may offer their services for free, it's important to recognize that expecting a free lunch isn't fair. To maximize your learning experience and build a valuable network, it's in your best interest to provide value to your mentor.
Embarking on a house flipping venture in Kentucky can seem daunting with the intricate steps involved – from mastering the buying procedure, collating essential market data, overseeing property renovations, to devising an effective exit strategy. These tasks are crucial and any mishaps could result in substantial financial setbacks. That's where the expertise of Real Estate Skills comes into play.
Our seasoned professionals stand ready to support you in this journey. We'll help you pinpoint lucrative markets, guide you through the intricacies of a property makeover, and build connections with a broad spectrum of real estate professionals to back your venture. Under our mentorship, you'll be well-equipped to confidently maneuver through the intricate dynamics of the Kentucky house-flipping industry!
Ready to start house-flipping in Kentucky? Join Alex Martinez at his FREE training to learn how to get started with house-flipping and wholesaling!
In addition to working with a mentor, aspiring investors need to do their part in researching the local market. Instead of trusting every resource, however, consider starting with these reputable sites:
Investors looking for a starting point to analyze the deal they find should reference the 70% rule. While not the most accurate, the 70% rule may act as a guideline to determine whether or not a deal is worth pursuing.
First, investors must identify the after-repair value (ARV), which can be done by evaluating nearby “comps” and the local median home value. Next, multiply the ARV by 70%, subtract the amount you expect to spend on repairs, and the resulting number sets the maximum allowable offer (MAO).
Here is the formula:
ARV - Fixed Cost - Rehab Costs - Desired Profit = Maximum Allowable Offer (MAO)
As its name suggests, the MAO is how much an investor can spend on a property and still make a reasonable profit. While the 70% rule doesn't encompass all aspects, it provides a rough estimate and should complement thorough analysis rather than replace it.
Read Also: Real Estate Comps: The (ULTIMATE) Guide
Most house flippers must raise capital to fund a deal. Even those who can afford to buy the property outright should raise money to fund a deal. That’s not to say you can’t fund your flip, but rather that raising capital is usually better. Those who use their own money are illiquid and have all their money tied up in a single deal, which asks for trouble. However, those who use other people’s money have more flexibility and can even scale operations with multiple loans.
Most house flippers rely on private and hard money lenders despite their above-average interest rates. While it’s unfortunate private and hard money loans may charge up to 15%, the benefits are well worth the price of admission. In exchange for the higher rate, investors gain immediate access to funds without dealing with bureaucratic procedures associated with institutional loans. The resulting speed of implementation may mean the difference between securing a deal and losing out.
Closing a real estate deal in Kentucky is similar to other states. Still, investors need to know Kentucky is an “attorney state,” meaning a qualified attorney must be present during the closing process. That said, the attorney will help oversee the closing steps:
Real estate investors must begin renovating the property as soon as possible. The faster the rehabilitation is completed, the lower the additional expenses and holding costs. However, it is important to maintain the deal's integrity.
Investors should act swiftly while keeping rehab costs affordable and on budget. The objective is to align the investment property with neighborhood standards while maximizing ROI.
According to Remodeling Magazine, the renovations that return the most money to investors in Kentucky (and the rest of the East/South/Central regions of the United States) are:
House flippers should try to sell the renovated property as soon as possible. In fact, it’s common for investors to start marketing their properties to home buyers while they are still making changes.
The faster the property sells, the better. As a result, it’s a wise move to consider working with an experienced real estate agent. Good agents can set an attractive sale price and expedite the entire process.
Here are some of the most popular ways today’s investors find houses to flip in Kentucky:
You do not need a real estate license to flip houses in Kentucky. No law requires investors to be licensed real estate agents to rehab and sell homes. However, it should be noted that becoming an authorized real estate agent coincides with several benefits.
Licensed investors will have MLS access and an extensive network of real estate professionals. In return for the benefits, however, investors must pay annual fees and keep current with license requirements. Therefore, it’s a good idea to weigh the pros and cons of each to decide what is best for you and your career.
Anyone who knows how to flip houses in Kentucky knows that capital is required to complete a real estate transaction, and flips are no different. It is worth noting, however, that investors don’t need to use their own money to flip homes in Kentucky. Instead, it’s common practice for home flippers to borrow the cash they need from hard money lenders and private money lenders. Otherwise known as flip loans, hard and private money loans are the best source of capital to flip properties.
Hard money loans are offered by private companies that practice asset-based lending; that means investors may qualify for a loan based on the property’s potential to produce a return rather than their credit score. On the other hand, private money loans operate similarly to their hard money counterparts, but they are less corporate. Private money lenders are anyone with excess cash and a penchant to invest it.
Outside of receiving a loan, investors are awarded one more way to flip real estate without using their money: wholesaling. Consequently, investors can receive the right to buy a home from the current owner without spending a single dollar. In return for promising to find the owner a buyer, a wholesaler can own the right to buy the home. That way, the wholesaler may sell their right to buy the home to an end buyer later for a fee.
For a better understanding of how to navigate real estate investing without using your own capital, don't miss our in-depth video on "How to Get Started in Real Estate with No Money." It's a step-by-step guide that breaks down how to make real estate deals without any money out-of-pocket.
House flipping in Kentucky has increasingly attracted the keen eyes of astute investors. Notable cities showcasing immense potential encompass Louisville, Lexington, and Bowling Green. Each of these locations presents distinct benefits to investors capable of understanding the market intricacies and pinpointing promising investment opportunities.
Learning how to flip homes in Kentucky has proven to be a lucrative endeavor for countless investors.
However, investing requires acute attention to detail and hard work. Only those who mind due diligence and take the appropriate steps can maximize profits and minimize risk during the flipping process.
Ready to learn from the best? Dive into the world of house flipping with the experts at Real Estate Skills. With our guidance, you can transform your passion for real estate into a profitable investment strategy. Start your journey with us today and unlock your potential in the Kentucky real estate market.
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