In the real estate market, tiny homes are experiencing one of the highest growth rates. It has been the case for several years, and things are only getting better.
The number of Americans who would consider living in a tiny home, according to a recent survey, is 56%. For first time home buyers, that number is even higher at 86%.
We examined how hard it is to sell a tiny home, and the conclusion was that it might be simpler than many expect.
That covered the question of the new tiny home market. What about those who seek to make a quick buck by flipping tiny homes already on the market?
How to flip a tiny house?
Flipping in real estate terms, stands for buying a property, renovating or improving it, then selling it for a profit.
The same principles that apply in flipping regular houses will apply to tiny homes too.
This is how you go about flipping a tiny house:
1. First, you need to research your market well: Understand whether the conditions are ideal to turn a decent profit that will justify the time you spend on the project. For tiny homes in particular, familiarize yourself with any changes in ordinances that may have necessitated the owner to sell. It may save you legal headaches afterwards.
You should also research on the maximum and minimum price a tiny house can sell in your preferred area, plus the average price.
2. Set a maximum budget for your project: Most unexperienced flippers end up burning their fingers. They end up overpaying for houses that require too much work and money to flip. The end result is barely breaking even or selling at a loss.
Every flipping project should have a maximum budget for the house purchase, and for the expected renovations. It goes without saying that added together, the two should not exceed the average sale price of a tiny house in a certain area.
3. Have your finances in order: You may be tempted to use your own savings to avoid bank interest rates. However, if you end up making a loss on the project, you take a huge instant financial hit. Taking a mortgage or other types of financing will cushion the effects of a loss, by spreading it out over a period of time. It is advised to only go the savings way if you have full confidence in your flipping ability.
4. Find and buy the house to flip: This is where the fun starts. Looking for a suitable house to flip can be both exhilarating and depressing. It is not a glamorous process, and a lot of inexperienced flippers end up giving up at this point. You need a lot of patience, and an ability to listen to your head not your heart. You will have an opportunity to view many houses, and you will need the restraint not to put down your money without much thought.
Ideally, you need a balance of low price, and not too much money needed to renovate. Patience is name of the game here.
During your search, you should combine multiple tactics, including in-person tours, online searches, calls to agents etc. To ensure a proper use of your time, it is also advisable that you make offers on multiple units at once, since a majority of them will be declined. If several are accepted, chose the one that makes the most financial sense to you.
5. Improve and renovate the house: Now that you have the house, it is time to prepare it for its next occupant. The renovation process should start immediately you get the keys to the house. Every day that passes without work being done is money lost. Even before completing your purchase, ensure you have identified a reliable contractor that can accomplish the project within time and budget. If this is your first time undertaking such a project, friends and acquaintances who have such experience can make recommendations.
You might face temptations to do things over-budget, such as buying expensive fixtures, but remember your research in step one should be the guiding principle. Installing expensive Italian marble may increase the value of the house, but no one will be ready to pay for it.
6. Sell your tiny house: Once everything is ready, it is time to put your house on the market. You should let an expert realtor handle this process for you. They know everything about pricing, and in fact, a realtor should have been the first person you visited before putting a down-payment on the house in the first place.
To make your investment worthwhile, you will want the house priced at a rate that gives you a good per hour rate, calculated based on the number of hours you put into the project. Many successful flippers end up making above $50/hr. Very successful ones will turn in over $200/hr.
7. Repeat: You don’t want to be known as the ‘one hit wonder’, do you? If your first tiny house flip was a financial success, there should be no reason why you should stop. Yes, flipping can take a toll on your mental health, but by repeating it over and over, you refine your process and soon you will have everything ironed out.
Where to find tiny houses to flip
The best place to find tiny houses that you can flip is on online listings. Websites like tinyhouselistings.com have a huge catalog fo tiny homes for sale across America. Identify potential lucrative flips, before making a physical visit of the property.
Cover photo – Lifeandmyfinances.com