Flipping a House: Real Estate Property Investments
Tuesday, August 01, 2006
Some of you may have heard of those who flip a house for profit. Others may even watch the TV shows, like "Flip This House" or "Property Ladder" and may be considering investing in real estate. What is House Flipping and should you consider doing it?There's a lot of information out there on flipping real estate - some good and some bad - but it's very important to know that it's not easy, that you need to do your research, and that there is no secret formula.
What is it? Flipping a house is, simply, buying a house for below-market value, renovating it, and selling it for a profit. Is it legal? Yes. There are several forms of it, but the one considered here is where people buy an existing home and remodel it. And the remodeling is not so extensive that it eats into profits.
What about the "Housing Bubble"? The sale of new and existing homes is slowing and the prices will probably be coming down in most markets. It might not be the best time to break into the business. However, there are some markets where it's still a viable option. Also, after the markets stabilize, if there is a correction, it could mean the opportunity to start looking into real estate purchases again. And now is a great time to start doing your research for when you're ready.
How will I know when the time is right? Well... the old saying goes, "If you have to ask..." The point being that you need to know the real estate market where you're going to flip. Really know it. Inside and out. That way you're not overpaying on a property and eliminating future profit. Property values and prime locations are very hard to nail down and can change in just a matter of months or even weeks (even during your flip.) It could be very important to team up with a quality real estate agent who could lead you through the rapidly changing jungle.
Do I need to be an Agent or a Contractor? No. It wouldn't hurt to have the knowledge those professionals do. But if you're not a G.C. or Real Estate Agent, you'll need to know them. Even if you're handy with a miter saw, "Time" is a house flippers enemy. You'll need help to monitor the markets, find properties, and to do the work. You'll need to hire a contractor to handle the remodeling of the house to save time. Here's a tip - you can find them for your flip on the ConstructionDeal.com website.
What will I need to fix in the Fixer-upper? You want to concentrate on buying a house that does not need a lot of structural repairs. You want a house that needs cosmetic changes - paint, trash removal, new counters, new flooring, and appliances. At best, you should only consider adding a bathroom as far as a floor plan makeover goes. Perhaps a new bedroom. Basically, you want to focus on remodeling the kitchen, bath, bedrooms, and basement. Adding copper pipes or a new septic system is not something that prospective home buyers will be able to see.
Should I have the property inspected? Absolutely! Get a professional Home Inspector to check for any plumbing, electrical, structural, and mold problems the house might have. Take the house off your list if means any long-term and expensive repairs to slow you down. The key to flipping a house is to turn it over in a short amount of time. You want to avoid making property tax payments and mortgage payments that will eat into your profits.
What else do I need to know?
- Have financing in place before you start, that way you have money to do your repairs and turn it over quickly.
- Make sure you have subcontractors in place and ready to start when you're ready. Have backups and backups to your backups so that you'll know the work will be done on time.
- Don't do more than you have to do. Protect walls, floors, patios during construction phase so you won't have to repair anything later.
- Don't fall in love with the house - it's a business and you're in it for a profit.
- Finally, don't put in an off-the-wall fixture or paint color because it's "to die for!" Just because you have eclectic tastes doesn't mean John Q. Public will like it. Modernize the house with granite counters and hardwood floors, but leave the red paint at home.
**The usual disclaimers apply - any type of investing is risky and no guarantees or warranties are implied in this information. Do your research and know that flipping homes is not easy and even many professionals lose money or only break even on their investments.**
RELATED POSTS:
How to Beat the Bursting Housing Bubble
How NOT to Beat the Housing Bubble
Flipping Houses: a Real Estate Investment Update
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Labels: House Flipping, Real Estate, Real Estate Investment
