The best way to earn money in real estate is probably by flipping houses. For those of you who don’t know what that is, it’s basically the purchase of homes, especially those under duress and that are underpriced (foreclosed, short sale, auctioned, has a tax lien and old homes), with the purpose of reselling them after few renovations and cosmetic repairs. It does not require millions to be able to jump-start your house flipping business, and you don’t need to make a bank loan either. There are many ridiculously underpriced houses being sold in the market today. If you only have the common sense to determine which property you can flip and which not, and you have a special talent in bringing out the beauty of neglected homes, you have the chance to make it in the real estate business. If you want to know how house flipping works, please read on.
Step 1: Knowing the Type of House to Buy:
There are two major types of houses you can flip; they are the flipper-upper houses and commercial and retail development houses. The flipper-uppers are houses being auctioned off and sold by the banks (houses under duress). They are cheap, but usually require a lot of repairs. You can still make a profit if you flip a flipper-upper, but you need to buy only a house that do not require a lot of money to renovate and repair. The retail development houses are those that are sold by property developers. You can buy a number of units and after few months sell them off for profit. These houses are for high-end buyers who want space and luxury home features.
Step 2: Ocular Survey:
The value of the house is greatly affected if the security in the area is problematic. Do visit the property you want to flip in the morning and evening and observe if homeowners and their visitors feel safe in the area. Get information what is the crime rate in that particular area. If there is a high incidence of burglary, assault and other crimes, you will have difficulty in selling the house later on. Check if the property is near to offices, markets, malls, schools, hospitals and other community facilities. It will also greatly affect the market value and chances of reselling the house.
Step 3: Home Assessment:
List all the problems of the property you want to flip. If the house requires major repairs such as plumbing, electrical and sewer system, you will be shelling out a big amount of money for repairs. Also, check if the house has termites, rodents and roof leaks. Take note of the minor cosmetic remodeling the house requires (new paint, fixtures in the toilet and bath, carpets and kitchen appliance). If you are not familiar with house remodeling, it is wise to hire a professional such as a home inspector to help you assess the house.
Step 4: Knowing the Costs for Renovations and Repairs:
Know how much it will cost you to buy all the renovation materials and pay wages of your hired handy men. Know what particular parts of the remodeling and renovations you can do yourself (e.g. painting walls, landscaping and installation of light fixtures). Things such as plumbing will require you to hire a contractor. Allocate a contingency fund in your budget for unforeseen expenses later on as you flip the property. Know where you can get discounts for your repair materials and in what way you can save money.
Step 5: Checking If You Can Make a Profit:
List the seller’s price for the property, your budget for repair materials and labor (including the contingency fund) and get the total. Estimate the possible market value of the house once you put it for sale. Calculate if you will make a profit, if you see that you will, go ahead and flip the property immediately!
Lolita Sheriow is a Real Estate Investor and Mentor. For more information, check out: house flip AND real estate trainers http://reihowtos.com/2011/12/5-tips-to-finding-good-real-estate-trainers/Share on Facebook