Even though the housing market is recovering, there are still great investment opportunities available. But being an educated consumer can help you prevent making mistakes. Here are some tips to help you if you are considering getting into the “flipping” market.
Money is made at the buy, not the sell of your flip.
When flipping a house your money is made at the purchase not at the sell of the house. So, many times people buy a house with the intensions of making a huge profit only to find out that they could not make any money after all the renovations because the purchased price of the house was too high. When you purchase your property you need to be sure that you buy the house with enough money to make renovations, have carrying cost, and add about 5 $6,000. Now, cost is at $147,000, and that is if everything goes as planned. Profit is under 10,000 dollars. The mistake was made at the purchase at the home, not the sell.
Get an inspection on the home – get a complete inspection done on your property.
By spending a few hundred dollars ahead of time on this expense you can save thousands in problems that you cannot see. There are several types of inspections – foundation, pest, wood rot, etc. and by getting a full inspection you can usually rest assured that you know everything that is wrong with the property before it is too late. In the contract for the house you need to make sure that you have 7 days to have a inspection performed, and if the inspection finds problems that are going to cost more money than you are willing to spend, you can get out of the contract with no penalties.
Don’t do the work yourself.
Get a contractor or several sub-contractors and have the work done quickly and professionally. You need to have the house flipped ASAP, so that you can get it on the market and get it sold. Even though a professional will add to the cost of your home repairs/renovations, it will actually save you money in the end because it should decrease the amount of time you own the home. You do not have to spend all our time working on the property and instead will be able to spend that time looking for the next deal.
Place the property 1 to 2% below market value
If you are wanting to flip real estate and make money the object is to buy and sell the property as quickly as possible, so that you can move on to the next house. If you purchase a house and try to sell it at top dollar to make an extra couple of thousand dollars on your flip, and end up holding it for 6 months you are losing money. Get the house on the market at a price that is going to blow the competition away, and providing you an opportunity for a quick sale. That is what you have to do especially if the market is slow.
Use a real estate agent
Do not try to sell you house on your own. Harness the power of a real estate agent and the power of the MLS system. When you do a FSBO you are depending on people driving by your house and seeing your sign, with a real estate agent you have someone actively marketing you house to get it sold. Once again this will free up more time for you to look for more great deals.
I hope this article has been helpful with the basics needs of flipping a house. But, do your homework before you purchase a house, and make sure that you can pull a profit on your deal. Then, make it happen!