Flipping houses in Tampa may be a very successful economic venture. Purchasing dated homes, remodeling or updating them, and then reselling them for a profit might earn you a comfortable income. This is one of the strongest business prospects in this sector, provided the real estate market remains solid.
The Tampa Bay area is the seventh most popular metro area for investors nationwide, according to a research from the Tampa Bay Times.
Potential purchasers are being pushed into the rental market by the escalating cost of homes in Tampa and the rest of the state. Rents have increased on average by a whopping 30% in Florida, the biggest increase in the nation.
What Makes Tampa, Florida a Great Place to Fix and Flip?
Tampa is a great place to invest in real estate. If you’re looking to expand your real estate portfolio, Tampa is a great option.
- The job market in Tampa, Florida, is hotter than the state’s average. In 2021, BizJournals named the Tampa-St. Petersburg-Clearwater metro area as the Best City for Finding a Job.
- Florida is expected to see an increase in its population of nearly 11% by the year 2023, according to population projections. There will be a greater need for housing as the population grows!
- There are a large number of foreclosed homes for sale. There are more foreclosures in Tampa than anywhere else in the country. It’s therefore possible to find an affordable fixer-upper.
- Tax rates are among the lowest in the country, with the state coming in at number 40 out of 52. If you’re planning to move to Tampa and start a real estate investment portfolio, this isn’t going to help you avoid capital gains taxes.
How to Start Flipping Houses in Tampa, Florida
Expert investors could utilize different strategies when flipping homes. However, if this is your first time, the following step-by-step instructions might be helpful:
Research neighborhoods and different property
As a real estate investor, you need to confirm that the area you intend to invest in is desired as a place to live and that there are homes for sale or rent there. You must research the local real estate market to accomplish this. One strategy is to speak with a real estate expert in the neighborhood you’re interested in. Another option is to utilize a real estate investment platform with precise neighborhood analytics.
Assess Your Budget and Financial Situation
You must determine how much you should invest in Tampa Florida property flipping. The real expense is the cost of purchasing and upgrading the home. You will need to finance your project unless you are able to pay for everything in cash. Therefore, check that the following items are in order before looking for a lender:
- Debt-to-income ratio: This statistic compares your monthly income to your outstanding monthly debt. This statistic is used by lenders to assess your financial readiness for new debt. Although some lenders approve loans to applicants with percentages as high as 40%, the permissible ratio varies by lender.
- Credit history: This is a record of your track record of paying off debts. This demonstrates to lenders your likelihood of making timely mortgage payments. If you do not already have a significant credit history, you can begin to establish one by applying for and using a credit card or securing a modest loan.
- Employment and income history: Some lenders will inquire about the stability of your revenue source. Make sure you’ve had two years of solid job (or income, if you’re a business owner).
One of the most crucial guidelines for Tampa Florida house flipping is the best way to make a budget (or anywhere else). The 70 percent rule indicates that you shouldn’t shell out more than 70% of a property’s after-repair worth less the cost of renovating.
Example of a Rule for 70%
Let’s imagine that in your preferred community, move-in ready homes sell for $600,000. You should strive to maintain your overall expenses at $420,000, which is 70% of $600,000. This might entail paying $300,000 for a house and remodeling it with the remaining $120,000. Keep in mind that this is the most you ought to spend. Your profit will be bigger if you wind up spending less than 70% of a house’s after-repair value (arv).
Plan your exit strategy.
Investors now use the term “house flipping” even if they want to keep the property after renovation, even though the term originally referred to fixing up a house and then selling it. Making decisions later on will be easier if you already know what you’re going to do with the property.
Make sure you have adequate money set aside, for instance, if you intend to purchase a fixer-upper to launch an Airbnb business. Meanwhile, foundational improvements, updates, and a few cosmetic changes can be sufficient for individuals who intend to market the home or rent it out as a vacant apartment.
Protect Your Money
If you intend to purchase a property with financing, getting pre-approved for a mortgage before you begin looking may make the process simpler. Sellers are more inclined to accept offers from purchasers who are either paying with cash or have documentation proving they can afford the property with a loan, particularly in a hot market. Having a pre-approval letter on hand will also make the closing process go more smoothly.
Set the right price
Only when you either resell the house you flipped or rent it out will you begin to make money. If you’re reselling, you must make sure that the asking price you choose is reasonable compared to other comparable homes on the market, otherwise your listing will languish on the market for a while. The rent should be competitive with what other properties charging comparable characteristics charge while still producing a positive cash flow.
Options for financing Tampa home flips
Unless you won the lottery and are now independently wealthy, chances are likely that you will need to find sources of money for your home flipping endeavors. The following is a list of the most common loan types.
Hard money loan
One common loan type used in house flipping is a hard money loan. A hard money loan might be easier to qualify for because the lender isn’t constantly looking at your credit. They may pull it to look at your debt-to-income (DTI) ratio, but they aren’t looking at the score itself. The amount of equity you have in your home may need a greater down payment.
Hard money lenders in Tampa like 14th Street Capital may have quicker approval processes and you might be able to get one with negative credit because there is less underwriting required. The disadvantage is that origination fees and interest rates could be much higher than with a more typical mortgage.
Home equity loan
If you want to engage in a real estate flip but don’t want to touch your primary mortgage because you like the terms of your current loan, you can get a home equity loan. They might use the current equity they have in their house as security. This second mortgage has a separate monthly payment.
Because the primary mortgage lender is given preference in repayment in the case of failure, home equity loans may have a rate advantage over primary mortgages. The calculations required to determine whether you can afford to do this are therefore crucial.
Home equity line of credit (HELOC)
HELOCs leverage the value of your house as security, much like credit cards do. You are provided a revolving credit line based on the equity in your current home. The two phases are a draw period and a payback term.
The draw period, for instance, may go up to ten years. During this time, you only pay interest on the portion of your credit line that you are really using. You can also add funds to the HELOC so that you have more ready to use for your upcoming project.
In order to begin remodeling and flipping properties in Tampa, the experienced lender 14th Street Capital will assist you in obtaining a hard money loan for non-owner occupied properties. These loans have flexible terms and little documentation. Get in contact with us today to begin investing in real estate.