The Beginner’s Guide to Flipping Houses for Profit in Chicago
UPDATED 12/2/2020 Flipping houses isn’t just a hobby for rich couples on television. The house flipping industry has led many average people to lives of independence and financial security. The average profit per …
Flipping houses isn’t just a hobby for rich couples on television. The house flipping industry has led many average people to lives of independence and financial security. The average profit per home flip has steadily increased since 2011.
For the last few years the average has floated between $62,000 and $67,000. If you consider that professional house flippers tend to sell between two and seven homes a year, your expected yearly income could be extremely impressive.
So, how do you get into the house flipping industry?
We’ve put together a useful guide to help you take the right steps to become a successful home flipper in the Chicago area.
Work in a Profitable Market
You may be tempted to work in your local market for the sake of convenience or for the love of your Chicago community. However, you should only invest your time and money into a market that has potential.
The house flipping industry and its success is based entirely on making appropriate decisions that lead to the highest profits. From one region to another, flippers can earn wildly different profits.
Based on information gathered by CNBC, the best states to flip homes for profit are:
- Los Angeles
- New Jersey
Illinois may not be on this list, but that doesn’t mean flipping a home in the Chicago area is going to be unsuccessful. As traveling to new states to flip homes isn’t an option for everyone, focusing on Chicago’s housing market may be your best bet at making a profit. Study the local housing market of Chicago as well as the suburbs and towns around the city for high supply and demand. Supply can be determined by looking at houses that are for sale, up for auction, or REO.
To determine demand, make note of other homes for sale in the area. Watch as their prices fluctuate over time and see how quickly they sale, or how long they remain unsold. This information is the most important to help you recognize the possibilities of a market.
Find a House to Flip
From online searches to hitting the streets, there are a lot of ways to find the perfect project home. Finding success in the house flipping industry means using all avenues to land on the best options available. Here are a few of our favorite ways to find a house for flipping:
- Go to auctions
- Search online for foreclosures
- Drive through prospective neighborhoods
- Look into home wholesalers
- Network with real estate investors
Go to Auctions
Attending auctions is a great way to land deeply-discounted probate and foreclosed homes. Check the website for Cook County and other nearby counties for a schedule of property auctions in the area. Be ready, though. Bidding at real estate auctions can get wild! If you can, be prepared to offer full cash for your purchases.
Search for Foreclosures
There are multiple websites that keep track of foreclosed homes from across the country. There, you can search for any foreclosures or pending foreclosures in your desired neighborhood or the wider Chicago area. You may be able to find some fantastic flipping opportunities for a fraction of what you would traditionally pay.
Drive by Neighborhoods
If you have a specific Chicago neighborhood in mind for your next flip, take a drive through the area. While some homes may not be listed as “for sale,” you can recognize the signs of an abandoned home. These signs include things like overgrown grass, an overflowing mail box, or boarded-up doors and windows.
Write down any prospective addresses and do a little research online to try and find the current owner. Success in the house flipping industry can often take a little research before the actual “flipping” begins.
Home wholesalers are individuals who work as a middle man for selling distressed properties. They tell the seller of the property that they will find a buyer. Then, they reach out to flippers and other professionals and sell the home for more than what the seller is asking, which is considered the wholesaler’s profit.
While this may not be the most cost-effective way of finding a flippable home, it is fairly quick and reliable.
Network with REI’s
Like any other job field, the house flipping industry is filled with professionals who improve their craft through networking. Talk to other real estate investors in Chicago and make professional friendships. This way, when an opportunity pops up that you may be interested in, they are more likely to reach out and let you know.
Know Which Repairs Cost the Most Money
Successful house flipping requires sticking to a strict budget. While certain improvement costs can fluctuate, there are certain issues within a home that can quickly drain your funds. As a professional flipper, your goal will be balancing between the items that need fixing the most and those that can add the most value to your home without blowing your budget.
Here is a look at some of the most expensive home repairs and how important they are to the success of your home flip.
On average, repairing the foundation of a home costs around $4,500, and some repairs can cost up to $15,000. Foundation issues are especially troublesome because it is something you will likely be required to fix before you can successfully sell the home for profit.
Flipping a home with foundation issues can still turn a profit, but you will want to consider costs to do so before making your final purchasing decision.
Siding and Window Issues
Siding repairs can cost anywhere from $100 to over $15,000. What makes these issues so worrisome is the disparity in repair cost along with the knowledge that damaged siding and windows often means there is other serious damage to the home underneath.
Water and pests that get in through damaged siding can create large issues to the structure of the home that are also costly to repair.
Concrete features on a property can add a lot of value. From patios and driveways, all the way toandnbsp;outdoor kitchens, there are so many ways concrete can be used. Unfortunately, concrete repair can get pretty pricey.
The national average cost of repairing a concrete driveway is just over $1,500. However, the damage itself can greatly shift the price. For instance, minor patches and repairs may cost as little as $300 or even be handled through DIY methods. However, even expensive repairs to concrete features hold a high ROI average.
If the property has a garage, which is very in-demand in the house flipping industry, you’ll also want to inspect the concrete floor inside of the garage for any cracks or damage. If there is damage, it is very important that you get it fixed. The integrity of the floor can affect the integrity of the entire garage. Not only can a big crack pose a tripping hazard, but it can grow even larger if water gets into the crack and freezes, giving you an even bigger problem to fix.
While you’re evaluating the garage floor, take a look at the other elements of the garage as well. Are all of the windows in good condition and sealed well? Do the doors work properly? If your garage door isn’t opening and closing properly, you’ll need to contact someone who repairs garage doors for residential garage door repair. To find garage door repair, you can look online for reputable companies that work in the area. Taking care of all of these details will help you stand out in the house flipping industry.
Like foundation, roof repairs will need to be completed before selling a home. So even though these repairs can cost thousands of dollars, you are kind of on the hook no matter what.
Your best option is to shop around for aandnbsp;rooferandnbsp;that has a great blend of experience and affordability. Check online reviews from non-affiliated websites and see what their real clients have to say.
Landscaping is one of the most expensive parts of working in the home flipping industry. While landscaping can increase the value of a home up to 14%, the total cost of these projects can often reach into the tens of thousands of dollars.
A tip to help you save money is to implement alternative landscaping methods likeandnbsp;bark dust blowing. This service can take a damaged yard and turn it into a professional and pristine work of art. The best part is, it costs a fraction of other landscaping techniques and it is not invasive to the existing property. This means it doesn’t run the risk of damaging buried power lines,andnbsp;gas lines, or plumbing.
Presence of Asbestos or Mold
Anyone in the house flipping industry can tell you that asbestos and mold removal are non-negotiable tasks. If your investment property has issues with either, you will need to get it fixed. This can cost anywhere from $500 to $4,500.
Typically, you should try to avoid purchasing homes with major asbestos or mold issues. However, if the expected gain on the property can handle the cost of removal, it may be worth it.
Keep Your Project Safe
Once you find and purchase your project home, you don’t want to let anything bad happen to it. Unfortunately, those in the house flipping industry can tell you that a poorly secured flip house will often fall victim to burglary and squatting.
The first step is to ensure all entry points to the home are secure. If your main entry and windows are in good shape, remember to consider makingandnbsp;garage door repairsandnbsp;as well. Many home break ins happen when criminals lift broken garage doors.
Installing cameras, alarms, and motion sensor lights are other techniques you should consider to keep unwelcome visitors from entering the home.
Research Disaster Repair Services
There are multiple reasons you may need the help of disaster repair services. You might find an excellently priced home that is suffering from severe water damage or you may burst a pipe in the middle of your renovations.
Either way, knowing who to call and getting quick action is the best way to prevent extensive damage to the home. Make some calls to find the best options in your area and inquire about late-night and weekend availability. After all, disasters can happen at any time.
How to Prepare for Selling Your Flip
Once you have the house prepared for sale, there are a few things you should consider.
Most Important Improvements
Have you researched other recently sold homes in Chicago to learn which amenities are in the highest demand? If you are having trouble finding interest in your home it may be due to a lack of one of these amenities. Some popular ones include:
- Central heat and air
- Upgraded appliances
- Modern technology
- Energy efficient options
Many of these things can easily be added to a completed home. Smart controlled lights and locks are available online and can be installed without professional help. Upgraded appliances, if they are in your budget, can often be provided with quick delivery options that include installation.
The most time consuming option may be installing central heating and air. However, this is a worthwhile investment. Having a professional HVAC service install a new central heat and air system can improve your property value by over 10%.
You need a professional HVAC company to service your air conditioning and heating unit if your home’s temperature is not changing or adjusting properly. Central AC service can be utilized as a preventive HVAC maintenance tool. It’s important to find trustworthy air conditioner vendors and controlled climate HVAC professionals for preventive maintenance and repair purposes. By utilizing a trusted and professional company, you can guarantee better air control and energy management efficiency. Controlled climate HVAC repair and maintenance is beneficial for many other reasons as well.
A properly maintained HVAC system will help make your air more breathable, help save money on energy waste, and allow you to enjoy the comfort of your home without worrying too much about your energy bill and whether or not the HVAC system is working.
Professional cooling and heating services can change your life for the better. New homeowners and buyers will be looking for this luxury when deciding to buy a home. This is a luxury that you enjoy and any sensible home buyer would want to enjoy as well. When buying a home, remember that it is an investment. Proper care and maintenance are imperative for resale time. If you need a central AC service provider, be sure that it is one you can trust.
Choose the Right Sell Price
Determining the best sell price for your flipped home is an intricate art. First, look at other homes that have sold in the area. They should be as similar to the home you are buying as possible. Check how much they sold for. After you have a few numbers, you can better estimate a selling price.
The house flipping industry isn’t for the timid. Having the courage to ask for a little more than the average home can be a lucrative technique. However, going too far over the average price can scare away prospective buyers before they ever even contact you, so play your cards wisely.
Boost your Curb Appeal
Curb appeal is one of the most important factors in selling your home. Not only does it serve to draw in prospective buyers, but it increases the value of the property as a whole.
You don’t have to break the bank to spruce up the curb appeal. Visit localandnbsp;garden centersandnbsp;to find some bright, visually appealing plants to add to the yard. Often, you can find plants that are almost out of season for a good discount.
Another option is toandnbsp;contact local tree pruning servicesandnbsp;to shape up existing trees and bushes to add a sharp, expensive appearance to the property.
Take Professional Photos
The most successful members of the house flipping industry know that taking professional photos is an important part of selling a home. Properly angled and lit photos can make rooms appear bigger and distract attention from any problem areas left in the home.
Market your House Online
When you are preparing to market your homes, you should take the time to study modern advertising techniques and how to reach your audience. Mobile ads are one popular way to spread information about your homes. In fact, most modern marketers focus over half their budget on the creation of mobile advertisements.
Consider which home search apps are the most popular. Those apps are where the majority of buyers are going to locate information about your house. Ensure that what they see is optimized for the app’s platform. If you find the apps limiting to your vision of a home ad, try linking from the app back to your main website.
The house closing process is stressful on everyone. You want to get the highest price for your home and the buyer wants to get the price as low as possible. This can mean that counter offers are flying back and forth like a ping pong ball.
To make sure you walk away happy, try to remember the following negotiation tips:
- Keep a level head. A low offer shouldn’t be taken as an insult to your work.
- Use multiple offers as a leverage tool.
- Keep contingencies in mind. If the highest bidder is contingent on the sale of another home, they may end up backing out and leaving you in a bad position.
- Don’t rush your buyer, but keep your end of negotiations quick.
- Keep bottom line fees in mind. You may need to pay lien releases, repayment penalties, notary fees, and much more.
To keep track of everything and get the best sell price possible, be sure to partner with a top-notch realtor. With a little patience and some savvy choices, you can make it big in the house flipping industry in no time.