Flipping 101
By: Erica Mendoza
With the Real Estate Market property values at an all time low we are seeing many more investors looking into flipping homes. We’ve all seen those TV shows like: Property Ladder and Flip this House in which real estate investors buy, renovate, and then turn around and sell the home in just a matter of weeks walking away with thousands in there pockets. They really make flipping houses look so easy that it makes you want to find an investor, find a cheap home, purchase it, make minor fixes to it and turn around and sell it to make thousands. But, as you can imagine the process of flipping is not as easy as it is portrayed on television. Flipping homes requires lots of time and energy in both finding the right property, fixing it, and getting it sold.
The first part of flipping a home is finding the right home to purchase. Along with finding the right property you also have to have the deep pockets to purchase and renovate. This is the most time consuming and difficult part of the process because you have to find the investors and/or lenders to fund the project as well as the” “right property”. “The pros will tell you that they make their money on the front end by buying properties for at least 30% below market value” (Curry). It’s very critical that you do your homework right by investigating the potential property first and then the area surrounding it. It’s a good idea to perform a property inspection just to make sure there aren’t any major problems with the property (i.e. major plumbing problem) that could later cost thousands of dollars to fix. When looking at the area around the property you should look up the recent sales to get a general idea of what typical homes in the area go for. It’s advised that you look into the neighborhood as well; is a good area, is it close to shopping, the schools, parks etc. The important part of finding the right property is to make sure you can make a quick sell after the renovations have been completed so that you can make your money fast and move on the next investment.
After finding the perfect property you now how to either find the right contractors to do the renovations of if you will be doing them yourself you need to start pricing out the materials needed to complete the renovations. If you will be hiring a contractor make sure to look for someone that comes with good references and experience because that can save you lots of time and headaches. The most important part about doing the renovations is budgeting. Staying on budget is the important tool to walking away with thousands of dollars. “Appropriate properties can be difficult to find, and repairs and renovations can be difficult to budget, costly and time consuming” (Hansz, 2010). We’ve all heard the term “Time is Money”, in flipping that is the key concept that you have to apply because the longer it takes to complete the flip the less profit you walk away with since you have to carry the mortgage for a longer period and you just never know how the market could change.
Lastly after all the renovations have been completed it is now time to put the property up for sale. Before having your first open house it is highly recommended that you “Stage” the home. Realtors agree that staging a home brings in more money than presenting an empty space. By staging the home you can give potential buyers an idea of first what the space is by defining it and then it gives them a picture of how it would look as there home. When it comes to putting up the home for sale it’s important to market it as much as you can so that you can get the most amount of traffic in the property and hopefully get that perfect buyer. A lot of investors lose a lot of money at this point of the process because of the carrying costs associated with keeping and maintaining the property on the market so when your budgeting keep in mind that you might have to keep the property on the market for a couple of months if it doesn’t sale fast. Keeping some money away for carrying costs is a good idea since you never know how the market might go.
With the drop in real estate values many have ran out in search of there flip not taking into account the reality of the process. Flipping houses may seem like the fastest and easiest way to becoming wealthy. But, the reality is that it’s a very difficult process; from finding the investors, property, contractors, and dedication. It is a good way to build you wealth if you do your research right.
Resources
With the Real Estate Market property values at an all time low we are seeing many more investors looking into flipping homes. We’ve all seen those TV shows like: Property Ladder and Flip this House in which real estate investors buy, renovate, and then turn around and sell the home in just a matter of weeks walking away with thousands in there pockets. They really make flipping houses look so easy that it makes you want to find an investor, find a cheap home, purchase it, make minor fixes to it and turn around and sell it to make thousands. But, as you can imagine the process of flipping is not as easy as it is portrayed on television. Flipping homes requires lots of time and energy in both finding the right property, fixing it, and getting it sold.
The first part of flipping a home is finding the right home to purchase. Along with finding the right property you also have to have the deep pockets to purchase and renovate. This is the most time consuming and difficult part of the process because you have to find the investors and/or lenders to fund the project as well as the” “right property”. “The pros will tell you that they make their money on the front end by buying properties for at least 30% below market value” (Curry). It’s very critical that you do your homework right by investigating the potential property first and then the area surrounding it. It’s a good idea to perform a property inspection just to make sure there aren’t any major problems with the property (i.e. major plumbing problem) that could later cost thousands of dollars to fix. When looking at the area around the property you should look up the recent sales to get a general idea of what typical homes in the area go for. It’s advised that you look into the neighborhood as well; is a good area, is it close to shopping, the schools, parks etc. The important part of finding the right property is to make sure you can make a quick sell after the renovations have been completed so that you can make your money fast and move on the next investment.
After finding the perfect property you now how to either find the right contractors to do the renovations of if you will be doing them yourself you need to start pricing out the materials needed to complete the renovations. If you will be hiring a contractor make sure to look for someone that comes with good references and experience because that can save you lots of time and headaches. The most important part about doing the renovations is budgeting. Staying on budget is the important tool to walking away with thousands of dollars. “Appropriate properties can be difficult to find, and repairs and renovations can be difficult to budget, costly and time consuming” (Hansz, 2010). We’ve all heard the term “Time is Money”, in flipping that is the key concept that you have to apply because the longer it takes to complete the flip the less profit you walk away with since you have to carry the mortgage for a longer period and you just never know how the market could change.
Lastly after all the renovations have been completed it is now time to put the property up for sale. Before having your first open house it is highly recommended that you “Stage” the home. Realtors agree that staging a home brings in more money than presenting an empty space. By staging the home you can give potential buyers an idea of first what the space is by defining it and then it gives them a picture of how it would look as there home. When it comes to putting up the home for sale it’s important to market it as much as you can so that you can get the most amount of traffic in the property and hopefully get that perfect buyer. A lot of investors lose a lot of money at this point of the process because of the carrying costs associated with keeping and maintaining the property on the market so when your budgeting keep in mind that you might have to keep the property on the market for a couple of months if it doesn’t sale fast. Keeping some money away for carrying costs is a good idea since you never know how the market might go.
With the drop in real estate values many have ran out in search of there flip not taking into account the reality of the process. Flipping houses may seem like the fastest and easiest way to becoming wealthy. But, the reality is that it’s a very difficult process; from finding the investors, property, contractors, and dedication. It is a good way to build you wealth if you do your research right.
Resources
Curry, Pat. “Flipping houses is harder than it looks”. Forget no-money down and other late-night TV fantasies. In the real world, flipping requires deep pockets—and plenty of hard work. Retrieved March 30, 2011.
http://realestate.msn.com/article.aspx?cp-documentid=13107725
Hansz, Andrew J, and Julian Diaz III. “Real Estate Analysis: Environments and Activities”. Dubuque, Iowa: Kendall Hunt, 2010. Chapter 14.
No comments:
Post a Comment