| Flipping Homes...Flipping Houses... What is everyone | | | | that's off. |
| flipping over? | | | | If your home inspector can give you a ballpark |
| In the past five years, you've obviously heard the | | | | estimate of costs, that's all the better. This way, |
| buzz surrounding flipping homes. There's a new TV | | | | you've got a second set of eyes looking out for you. |
| show popping up weekly, it seems. And it's hardly | | | | *** BONUS TIP *** You can often use a home |
| even possible to keep track of them all these days. | | | | inspection to ask for credits or renegotiate the |
| But, what's the real scoop behind all the "flipping | | | | purchase price. |
| houses" buzz? And is it right for you? | | | | Step 4: Don't Get Emotional |
| In this article, we're going to dispel some of the | | | | Flipping a home can be emotional by nature. Murphy |
| myths surrounding flipping homes and also give you | | | | always rears his ugly head when you least expect it. |
| the steps in case you want to jump in. | | | | So, don't become so desperate! Don't let your |
| First off... the term "flipping houses" often refers to | | | | emotions get involved. If the numbers don't work, |
| two different things: | | | | move on to the next house. There are plenty of |
| 1. Wholesaling - also known as assigning the contract | | | | homes on the market to flip and there's no reason to |
| - is when you simply put a property under contract | | | | take on a bad deal just to do a deal! On the "flip" |
| and sell the contract to someone else, usually | | | | side - no pun intended - many people believe their |
| another investor. | | | | improvements have increased the value of the |
| 2. Retailing - or rehabbing - is when you actually buy | | | | property above the original value they had estimated. |
| the house you are going to flip, do the repairs, and | | | | This can be VERY dangerous because you can wind |
| then sell the house, usually to an end buyer, or | | | | up holding the property longer, making less money, |
| homeowner. | | | | and getting left with a bad taste in your mouth. For |
| On TV, they're showing the latter: buy-fix-sell. | | | | instance, they estimated the property would be |
| There is a lot of money to be made flipping houses, | | | | worth $250,000 at the beginning, but wanted to |
| but if you don't do it right, you can also LOSE a lot | | | | "test the market" at $275,000 for a few weeks. This |
| of money. What you don't see on the television | | | | is not recommended as the majority of traffic will |
| show is how they find their properties, how much it | | | | come in the first 2 weeks that follow after you first |
| costs to acquire the properties and, in most cases, | | | | list the property for sale. |
| the profit. It's funny how these programs very rarely | | | | Step 5: Know Your Numbers |
| tell you HOW MUCH the person REALLY made from | | | | Late night infomercials and shows like "Flip This |
| the deal (not the gross profits, but what they put in | | | | House" or "Flip That House" don't get into the real |
| the bank after all is said and done). | | | | details of the deal. You hear stories like this: investor |
| So, how do you go about flipping homes (aka House | | | | buys the house for $200,000, put $25,000 worth the |
| Flipping) the RIGHT WAY - where you make a good | | | | repairs into the home and sell it for $250,000, putting |
| chunk of money in a relatively short period of time? | | | | $25,000 into their bank account. These don't take |
| There are really only 7 steps to flipping houses. And | | | | into account buyers closing costs when you buy - |
| if you follow them, you will make money! | | | | holding costs including taxes, insurance, utilities and |
| Step 1: Flip A House Close to Your Home | | | | mortgage payments - and selling costs when you |
| Look in your own backyard for deals. Too many | | | | finally sell. |
| people look at properties that are too far away for | | | | In the real world, you must know: |
| their first deal. I know from firsthand experience. The | | | | - Purchase costs: Upfront mortgage fees, attorneys |
| first house I flipped was 4 hours away and it took a | | | | fees, regular closings fees, title, survey, etc. |
| lot out of me. You want to be close enough to | | | | - Carrying costs: It's more than just the repairs! |
| supervise the job and/or to work the house at night | | | | When you're flipping real estate, you're likely paying |
| and on the weekends. Plus, you'll probably have a | | | | higher interest rates than on, let's say, a primary |
| better idea of the values if the property is in close | | | | residence or second home. In addition to the repairs, |
| proximity to where you live. | | | | you've got to consider monthly payments, taxes, |
| Step 2: Find the Right House to Flip | | | | insurance, utilities, etc. |
| Not every "deal" is really a deal - even if you can get | | | | - Selling costs: Again, you've got closing costs and |
| it cheap! Keep in mind the location of the house you | | | | possibly real estate commissions to consider. |
| are flipping. Is it in an area where people are buying? | | | | Step 6: Make A Plan... And Stick To It |
| Or is it in an area dominated by rentals? Pay | | | | Create your "House Flipping" plan and stick to it. |
| attention to the condition. For your first few deals, | | | | Decide what you're going to do, when you're going |
| look for properties that need cosmetic repairs only. | | | | to do it, and how you're going to do it before you |
| Cosmetic repairs include paint, flooring, kitchen, | | | | even close on the property. Then, you're simply |
| landscaping, etc. Save the houses that need | | | | managing the project and tracking your progress - |
| structural repair, roof repair, HVAC repair, major | | | | not reinventing the deal every other day. You'll know, |
| plumbing, and major electric repair for more seasoned | | | | at any given time, where you stand on the deal. |
| investors. You could open up a can of worms that | | | | You'll stay focused by keeping the bottom line in |
| you're not able to deal with financially and from a | | | | front of you all the time. |
| time perspective. | | | | Step 7: Expect the Unexpected |
| Step 3: Have A Through "House Flipping" Inspection | | | | Any time you're flipping homes, you'll run across |
| A "House Flipping" inspection is slightly different than | | | | SOMETHING that you simply didn't expect. Whether |
| your standard home inspection. You're going to ask | | | | it's an issue that pops up 2 hours before closing that |
| your inspector to look thoroughly at the 5 major | | | | needs to be handled or a big surprise when you peek |
| systems (plumbing, electric, roof, HVAC, and | | | | behind the drywall that you had to replace! You'll |
| structure). The cosmetic repairs will be less important | | | | almost always run at least a little over budget or hold |
| since you're going to be renovating the home. Expect | | | | it a little longer than you anticipated. But at the end |
| to change out ceiling fans, cabinetry, flooring, etc. | | | | of the day, you'll have the satisfaction of taken an |
| These are the reasons you're getting a great deal in | | | | ugly house and turned it around and depositing a |
| the first place. You don't want your inspector to | | | | healthy check in your bank account. Keep your |
| "skip" the other items, you just don't necessarily | | | | expectations in check and you're in for a big pay day! |
| need to know every hinge or piece of hardware | | | | |