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Article #59: Flipping Homes, House Flipping: What's It All About

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






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