Flipping houses is a popular real estate investing strategy that allows anyone to earn substantial returns by renovating and reselling properties. While flipping homes certainly isn't easy, you don't need to be a real estate expert or accredited investor to get in on the action. All you need is the proper training and a team of professionals in your corner, and you can earn substantial returns.
With over 3.6 million housing units and a median property value of $330,600, there is ample opportunity to flip houses in Virginia. However, you must do your research and take things step-by-step to succeed. So to help you prepare, here is a comprehensive guide on how to flip houses in Virginia.
Flipping houses refers to purchasing a property, performing renovations, and then selling it at a higher price. Typically, the property will be distressed, which means the owner is behind on the mortgage or taxes, and there is likely deferred maintenance.
House flippers will look for homes sold at below-market prices and then do the upgrades and renovations needed to sell the property at market value.
Virginia's real estate market presents a unique opportunity for house flippers, even amidst the ever-changing landscape. Despite a recent dip in home prices and sales, as reported by Redfin in March 2023, the state's housing market continues to show strength and resilience over the longer term.
According to Zillow, the average home value in Virginia has grown to $364,208, marking an increase of 3.7% over the past year.
Furthermore, Neighborhood Scout data reveals a total appreciation of 11.66% during the previous year and an impressive 27.85% over the last two years. Over the past five and ten years, total appreciation has been 46.19% and 65.32% respectively, averaging 7.89% and 5.16% annually. This consistent, long-term growth trend suggests a robust market with a strong potential for returns.
In light of these figures, house flippers should consider Virginia as an attractive market. In spite of recent fluctuations, the state's real estate market shows a strong history of appreciation. Potential investors should approach the market strategically, leveraging the current dip in prices as a buying opportunity. However, it's also important to consider that homes are staying on the market slightly longer, so flippers should be prepared for this in their investment timelines.
With careful planning and strategic investment, house flippers can capitalize on Virginia's robust real estate market. It's always recommended to thoroughly research specific local markets and consult with real estate experts to inform your investment strategy.
Ready to begin your house-flipping career in Virginia? Join Alex Martinez at his FREE training to learn how to get started with house flipping and wholesaling!
Now that we are ready to dive in, here are 7 steps to effectively learn how to flip a house in Virginia:
If you're new to the business, then you'll want to start by finding an experienced flipping mentor to show you the ropes. Many real estate investors will gladly serve as your mentor if you are willing to help them locate deals and perform necessary tasks. Even if you have to pay for mentorship or split the profits, it's often a safer bet than going at it alone.
Flipping a house can be risky if you aren't properly prepared, and you could lose money and potentially destroy your credit if you make a mistake. A mentor will help you avoid these pitfalls and allow you to keep some profit until you have the necessary experience to do it yourself.
So start by networking at local real estate events or contacting people in your personal or professional network to find a flipping mentor.
Next, you'll want to study the Virginia housing market carefully. Researching the market and understanding the different home prices and factors that impact the real estate market is crucial to your success as a house flipper. Just because a property is offered at a discount doesn't mean it's a good deal. So you'll want to study the market and understand what makes a good deal and why.
The best way to learn about the market is to connect with other real estate investors and home flippers and learn their techniques to locate and analyze investment properties. You can network with other real estate professionals at a local real estate investors association or by joining the local chapter of the National Association of Realtors.
Virginia Real Estate Investor Associations
You should also familiarize yourself with essential pieces of legislation that impact the Virginia real estate market. The Commonwealth of Virginia Real Estate Board oversees the practice of real estate in Virginia. You can learn more about their rules and regulations by reviewing STATUTES Title 54.1, Chapter 21 of the Code of Virginia.
Once you've mastered the basics and thoroughly understand the Virginia real estate market, you can begin analyzing properties. There are several methods for finding distressed properties that you may consider. You can drive around the neighborhood and look for abandoned homes or check the public records for foreclosures. You might even want to start working with a wholesaler who will scout opportunities on your behalf.
You'll also want to learn how to analyze a deal and learn how to calculate your potential profit margin to determine if it's worth your time. One of the most important formulas you'll need to learn is after-repair value or ARV.
ARV refers to the price the home will likely command on the open market if it is renovated to market standards.
You'll need to learn how to determine the ARV and estimate the repair costs required to get the home into good condition, so you know how much you can afford to pay and still make a healthy profit. This is known as your MAO or maximum allowable offer.
As a good rule of thumb, your MAO should not exceed 70% of the ARV minus repairs.
Although, if you want to get more precise, the MAO formula is:
MAO = ARV - Fixed Costs - Rehab Costs - Desired Profit or Equity
You can determine ARV and MAO by enlisting the help of a real estate agent and/or a contractor. Or, you can do it yourself using a rehab calculator and pulling real estate comps.
Also, be sure to factor carrying costs into your calculations, which include things like taxes, utilities, and other expenses related to owning the property. If it's your first flip, it's best to enlist the help of experienced professionals, but you can also use any available data online.
Once you've found a potential deal and agreed with the homeowners on a price that makes sense for your budget, you'll need financing, unless you plan to pay cash. Most borrowers look for hard-money loans because they're often the best for flipping houses. Hard money loans are short-term, non-conforming loans that use the property as collateral.
So if you don't repay the loan, the hard money lender can repossess the home to cover the loss. Hard money loans typically have less stringent requirements than traditional bank loans, and you can often be approved relatively quickly and pay it off once the deal closes.
You might also consider a private money loan, which is non-traditional funding offered by private money lenders or companies. So if you know anyone with a lump sum of cash to invest, you should consider bringing them your deal. You could also look for bank financing. Although a traditional mortgage isn't usually recommended for fix-and-flips due to high-interest rates and prepayment penalties, the bank may also have other options, such as flip loans and small business loans.
You could also look into seller financing, which refers to paying the seller in installments while you finish the repairs. Or you could bring in other investors and pool your money in a joint venture partnership to reduce the individual risk. There are several financing options to consider, so you'll have to research and shop around for the best rates.
After finding a deal and securing financing, you'll want to close on the property. The closing process will be the same as any standard home purchase, but it's essential to understand the local regulations and customs in Virginia.
First, you will sign a purchase contract and conduct your due diligence, which includes a home inspection and an appraisal or broker opinion of value if required by your lender. If everything checks out, you will proceed with the sale and prepare for closing.
According to the Real Estate Settlement Agents Act, you must have a settlement agent at the closing, which could be either an attorney, title company, real estate agent, or financial institution. The settlement agent will conduct a title search and prepare a payoff statement with information about property taxes and other fees to bring to the closing.
They will also answer legal questions and ensure the proper paperwork is signed and the funds exchanged hands. Once you sign the dotted line, the property is officially under your control.
Over the next few weeks or months, you will begin the renovation process. Before finalizing the purchase, you'll want to find a trustworthy contractor and assemble a team so you can start work as soon as you close on the property. The longer it takes to renovate the home, the more likely it is that carrying costs will eat into your profits or other issues and delays will threaten the deal.
So you'll want to create a detailed construction calendar and start working as soon as possible. It's also essential to develop a budget for the renovations and leave yourself a cushion for unexpected fees and delays. It's rare that everything goes according to plan and happens on schedule. So if you don't budget for the unexpected, you may run low on cash.
Some of the main improvements buyers will expect include:
You can always get creative and add finishes that might add value to the project, such as granite countertops or a swimming pool. Just crunch the numbers and ensure these additions have a realistic ROI.
Read Also: Red Flags Before Hiring a Contractor
Finally, you can put the home on the market once all the repairs and renovations are complete. In most cases, you'll sell to retail buyers or your average homeowner looking for a primary residence. However, depending on the market, you may sell to an investor looking for a rental property. It may be smart to hire a real estate agent to help market the home to speed up the process. Speed is everything when it comes to fix-and-flips, and the more time you own the property, the less potential profit you will make on the deal. So it's often less expensive to pay a commission to an agent than to let it languish on the market for several months.
Another important thing to pay attention to is the buyer's appraisal, which could make or break your deal. If the assessment reveals that the home's value is lower than your desired listing price, it could be disastrous for your profits, and you may need additional renovations. So, before even listing it, you may want to have your team confirm the condition and value of the property.
However, once you find a buyer and get through the due diligence phase, all that's left to do is close the sale and collect your profits. You'll go through the same process as you did to purchase the property, and when you receive the fund from the buyer, you can pay off your own loan and any other closing costs. Whatever is left over after paying your team will be yours to keep.
Read Also: Real Estate Marketing (The Ultimate Guide)
There are several different methods you can use to find houses to flip in Virginia. You might network with other investors or real estate agents who can access the multiple listing service, better known as the MLS, and use it to find homes in foreclosure and preforeclosure. You can partner with a wholesaler or a group of wholesalers who will scout properties on your behalf.
You could learn to search public records or purchase lead lists from online services. You could also attend property auctions and buy homes that have already been repossessed. Part of your success as a house flipper will depend on your ability to find leads, so you may want to try a few different methods to see what works best for you.
No, you do not need a real estate license to flip houses in Virginia. A license is not required to buy and sell a home on your own behalf, even if it's an investment property.
You only need a license to represent another party in a real estate transaction for a fee. So, as long as you stick to simply buying, renovating, and selling the property, a license is not required.
Even if you don't have any money, you can still flip houses in Virginia. As long as you know how to identify deals and lead the project, you should be able to find someone willing to provide you with the funding. Some lenders will not require proof of income or a down payment if your deal makes sense.
For instance, you could look for a private money loan from someone in your personal network who may believe in your abilities. Hard money loans are another good funding source because they're secured by the property, so as long as the deal works and you have decent credit, you should get approved.
Crowdfunding the capital and distributing the profits among a large pool of investors online is another possible strategy or you could also start as a wholesaler and offer to manage the deal on behalf of another silent investor. Although it may take more work and negotiating skills, it is possible to flip a house in Virginia with no upfront capital.
Thinking about investing in real estate? Join Alex Martinez at his FREE training to learn how to get started with house flipping and wholesaling!
If you're considering house flipping in Virginia, knowing the best locations for investment is key. Certain areas provide higher potential profit margins, fueled by affordable real estate prices and consistent growth. Here are some top picks for those exploring how to flip houses in Virginia:
In essence, any location that is affordable and exhibits steady market growth can be an excellent place for house flipping in Virginia. To maximize your investment, it's crucial to understand the local markets and choose your properties wisely. With a strategic approach, flipping houses in Virginia can be a rewarding venture.
Venturing into house flipping in Virginia can be both exciting and challenging. With the right mindset, dedication, and the support of an experienced team, the potential for significant returns is within reach. However, it's vital to approach this endeavor with a comprehensive understanding of the local real estate market and the risks involved.
At Real Estate Skills, our team of experts is ready to guide you on your Virginia house-flipping journey. We're committed to providing the knowledge, resources, and support you need to navigate the intricacies of the Virginia real estate market successfully. Avoid common mistakes and maximize your returns by leveraging our wealth of expertise.
Let RealEstateSkills.com be your trusted partner in turning your Virginia house-flipping goals into profitable realities. Get started with us today.
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