How to Flip a House

Posted on August 5th, 2009 by Elaine

(No Ratings Yet)

Loading ...

No Comments (Post Comment)

Republish

The term flipping means you buy a run-down house or property at a low market price , then increase its value before you re-sell it immediately, in a short period of time. If done quite well, you, the flipper, will gain a decent profit. If you know how to do it properly, this task will be manageable and will be of great financial help.

What You’ll Need:

Run-down property
Money for investment
Realtors
Buyers

Procedure:

Educate yourself on buying a condo unit or a home. Know how to place an offer, get a mortgage, remove conditions and take possession. If you already know the basics and the process, then you can skip this step.
Consult with a few realtors. They will help you familiarize yourself with on the real estate market where you’re investing. If they tell you that the market is in low demand, and everyone is trying to liquidate their homes, then flipping will be more challenging. Wait until the real estate becomes “bearish”.
Know how much money you’ll need to buy and renovate a house. Do basic research on typical home renovations, and include it in your budget.
Look for a home to flip. You should expect homes that require plenty of improvement, such as old carpeting, crumbling walls or a run-down yard. You’ll need a little money and hard labor to fix these. They’ll provide an excellent ROI when you flip the house. You can also look for “distressed properties”, those that sellers are desperate to sell (bankruptcy, divorce, poor condition).Make sure the property you find sell in the upper to middle range, as these sell faster. These cost between $200,000 to $500,000.
Secure a loan for the property you’re buying. You shouldn’t borrow the exact amount, but rather get a few extra thousand dollars more. You’ll need these for improvements and repairs.
Negotiate on the property, then purchase it. When you make the offer, make sure you have multiple ways out of the contract you make. One of the most common is stating “subject to financing by (date)”. If you can’t make financing by that time, you can ask for an extension on the condition date.
Renovate the home as quickly, but efficiently as you can. Tear out old carpeting to show hardwood floors. Repaint outside and inside. Touch up on the old fixtures. Improvements in the kitchens and bathrooms are great. Improve the landscaping, too. The trick is to renovate as beautifully and neatly, without spending too much money. One good tactic is to do the renovations yourself or to hire laborers that won’t ask a high wage (like college students looking for summer jobs).
You now have to stage the house. This refers to the showcasing or displacing the newly-renovated home and making it clear that it’s for sale. Remember, first impressions last, so make sure you make it as good as you can.
Show the home to potential buyers and discuss it with them. This process should take at least a month or less. If you realize that a particular problem is mention, use your remaining funds to improve, repair or remove it. You can also modify your selling strategy, so attention is distracted.
Sell the home at a price that significantly higher than the amount you used to purchase and renovate it. Afterwards, pay off the loan and deposit the profit. Enjoy your hard-earned money. Make sure you also report the profit to the IRS, otherwise you might get a difficult audit down the road.

Some Tips:

Make sure you have excellent credit.
Real estate club meetings will be a great way to learn more about this profitable business.
You can flip a new property, too.
Flipping a house can be risky, and you’ll end up owing a great amount of money to the bank. Make sure you’re fully aware of what you’re doing.

If done properly, flipping a house is an excellent way to earn money. With a little research and some hard work, you can turn that old worn out property into money.