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Flipping Homes, House Flipping: What's It All About

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



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