A house that has intentionally been built upside down

As homes in Austin continue to fly off the market, you may find yourself wondering how you can get a piece of that prized Austin real estate pie. Flipping homes is an adventure that not only promises creative challenges, but if done correctly, it can result in a large profit margin. But as with anything, it pays to be educated. When it comes to Austin real estate, fully understanding the intricacies of flipping houses is not only advisable, it’s a necessity.

How Does Austin Measure Up in the House Flipping Market?

The first thing to consider is the real estate market of the city in which you’re looking to flip homes. Austin TX can unfortunately be somewhat more challenging than most.

A 2017 report by Attom Data Solutions found that Austin was actually one of the worst cities to flip houses, with many homes in Austin producing profits below the national average. The report states that during Q2 of 2017, some 216 homes and Austin condos were flipped at a median sale price of $335,160. The median purchase price was averaged at $266,000, giving a Return of Investment (ROI) of 26%…an extremely low rate. The report states that it took roughly 219 days to flip an Austin home.

One of the reasons is the influx of new residents moving to the city every day. Homes in Austin often get snapped up the second they hit the market. This can make it difficult to find properties that are listed below their value.

Before you get started on your house flipping journey, take some time to closely study Austin real estate. The more research you do, the smaller your chances are of making costly mistakes.

But What About All the Millionaires Flipping Homes on Television?

In recent years, there’s been an abundance of do it yourself TV shows that depict flipping homes as an easy endeavor. While these shows are extremely popular, they often skirt the minutiae of what’s involved in the house flipping process, and are pretty far from representative of how it all works.

If you’ve ever bought a house, then you certainly know, it’s a lengthy process. (If you haven’t, you may want to read our guide on Buying a House in Austin to get an idea of what it’s like.) Add to that the time it takes to renovate a home. Many of these shows also gloss over the financial details and payouts involved in the house flipping process, such as commissions, closing costs, holding costs and fees.

Though these television programs present an environment where scores of people are lining up to buy a flipped property, most investors have to work fairly hard to locate the right homes in Austin to flip. None of this can be done within a 60 minute time period, as portrayed on TV.

Another common misrepresentation (often exacerbated by television) is the “get rich quick” element of house flipping. Yes, there are profits to be made from flipping homes, no doubt it can be highly lucrative, but this is not a job for the faint at heart, or for those looking to turn a profit quickly, particularly here in Austin. In Austin, it can actually be quite the opposite.

Due to the fees and laws involved in house flipping in TX, for many investors, it’s cheaper to hold onto their investment homes in Austin longer in order to avoid paying additional fees.

Another thing to be weary of: Many of the stars of these television shows, while having experience in real estate, often capitalize on their success by offering house flipping seminars at exorbitant prices. These courses typically start at $2,000, and then these stars upsell the cost of their courses and related materials into the $25,000 range.

Unfortunately, all too many people pay these exorbitant prices, and end up investing their life savings. That’s even before they purchase a home to flip. While there may be some valuable information to gain from these seminars and courses, and some may even be legitimate, it’s always good to be cautious. You don’t want to spend the bulk of your savings on something that may provide little in the end.

Once you understand how it really works, and know what to watch out for, remember that house flipping can also be quite profitable. Like anything else, make sure you understand all the moving parts before you forge ahead.

Finding Balance between the Cost and the Work When Flipping Houses

The real key to flipping homes in Austin is to find motivated sellers who are willing to sacrifice some equity for a fast sale. To make money on the property, the purchase price needs to be about 70% of what the house will sell for, once it has been renovated. So learn everything you can about buying Austin real estate.

You’ll want to find owners, who are eager to sell, need to sell quickly, and may negotiate at a lower price; often this situation is more prevalent during off-season. Always take note of the repairs that will be needed and the overall condition of the house before you make an offer.

The best properties for flipping are often those that only need cosmetic renovations. If a house needs significant repairs to the foundation, plumbing, or shows signs of mold, that property should almost always be avoided, as these problems can increase the cost of a flip significantly.

Checking a house thoroughly for things, such as cracked walls, warped floors, and signs of water damage can save you thousands of dollars and make your renovation experience much less stressful.

Licensed Realtors® should be involved in all aspects of the process, including writing the buying contract if you’re purchasing directly from a seller, the sale of the property, and helping you locate the best properties to flip. Your Austin Realtor® should preferably have experience flipping homes themselves.

The Best Homes in Austin for Flipping

Vacated homes in Austin are a good option, as the longer a house remains empty, the more the owner will be itching to sell it. When there’s no one maintaining a property, it can start to show visible signs of neglect and deterioration within a couple of weeks; this is an incentive to rent or sell the property quickly.

Another way to find good deals on homes in Austin is to look for houses that have been seized for property tax evasion. For house-flippers, tax deed sales secure the ownership rights to a property for a fraction of its actual market value.

Foreclosures and repossessions can lead to properties being marketed for less than what they are actually worth, which is exactly what you want to find when you’re looking for houses to flip. This type of investment is riskier since you can’t always get a good look at the house before you make a bid on the property. These are also very rare in Austin.

If the previous owners were having financial difficulties, it is very possible that they could not continue to maintain the house, and in some cases, they may purposely cause damage to the home out of spite. This isn’t a big problem if you were planning on renovating the house anyway, but these possible unforeseen circumstances should be taken into consideration when you are calculating your budget for repairs.

You may also want to check out our article on popular styles of Austin TX homes.

Finding the Budget to Flip that House

Being able to make a cash offer is especially enticing to a seller, because it’s then a fast and secure purchase.

If you don’t have the cash on hand for the entire investment, however, consider partnering with an investor to help with the costs. Some of the repairs may need to be hired out, so creating relationships with licensed and trustworthy contractors will also help speed up the process and guarantee quality work.

We can’t stress enough how much an experienced Austin real estate agent can help you in this process, particularly with finding the right homes in Austin that have the potential to be renovated and sold for a profit. When choosing a Realtor® to work with, be sure to choose one who has the connections and the know-how to find great Austin real estate and can help you every step of the way. Here at Habitat Hunters, we have real estate agents skilled and savvy in the house flipping process. So if you’re looking to make the highest profit possible in Austin real estate, contact our Austin real estate agency today.