Not all real estate investment is renting a property out and dealing with tenants, i.e. buying a holding and taking advantage of the property appreciation. Another popular method is rehabbing or flipping real estate.
Flipping real estate is buying a property, fixing it up, and reselling it for a quick profit in as short of term as possible. This is also known as “rehabbing”, or “retailing” and churn & burn, to name a few. In short the 3 stages of the process is buying, fixing up and reselling.
Follow these 7 tips to start investing in real estate today:
1. An Excellent Source of bargain priced property –
I’ve found that HUD repos are an excellent source of homes to flip. And there is new list of properties that comes on the market every week. The prices are low because the mortgage company wants to get the property sold in just a matter of weeks.
2. Find the “Right” Property
Not every piece of real estate is a good investment – even if you can “steal” it! Make sure you look at things like:
* Property Location – Will you be able to sell the property once you’ve renovated it? No matter what you do, never purchase property that is in a bad neighborhood. That’s just bad for business, period. It really doesn’t matter how nice the property is. As long as that house is located in a neighborhood that most, if not all, people would consider a threat to a person’s health and security, stay away from it.
* Condition – How much work- and what kind of work – needs to be done and is it a project that you can afford to take on financially and from a management perspective?
3. Do A Thorough Inspection
It’s a good idea to have a contractor or handyman already lined up to work with you with the understanding you will get them plenty of work over the coming years.
You may also want to have a home inspection to check out the major items: foundation, roof, plumbing, electric, HVAC.
Unless have a background in construction, then it’s a good idea to have a full home inspection. It may cost you a few hundred dollars, but will catch things that maybe you didn’t know to look for. When flipping real estate, it’s the “little” things that add up very quickly and can eat up your profits!
4. Financing Your Purchase
Get good advice from mortgage lenders and get you financing pre-approved. This will put you in a stronger bargaining position knowing your limitations.
5. Know Your Numbers – All of Them!
Costs associated with flipping real estate are:
* Purchase costs: Upfront mortgage fees, attorneys fees, regular closings fees, title, survey, etc.
* Carrying costs: It’s more than just the repairs! When you’re flipping real estate, you’re likely paying higher interest rates than on, let’s say, a primary residence or second home. In addition to the repairs, you’ve got to consider monthly payments, taxes, insurance, utilities, etc.
* Selling costs: Again, you’ve got closing costs and possibly real estate commissions to consider.
6 – Market and Sell the Property
Put a For Sale By Owner sign in the front yard immediately to start building a buyers’ list.
Once the job is complete, call all the interested parties back and invite them to an open house and accept offers! Make sure you’ve kept all of your receipts so you can prove any repairs to the buyer’s mortgage person and/or the appraiser.
7. Expect the Unexpected
Sure, it’s possible to a property over VERY quickly. My record from closing table to closing table (the time I bought the probably til the time I sold the property) was 33 days for a quick $ 10,000.
But, make NO mistake, those types of deals are few and far between, so be forewarned – Flipping real estate takes work… But the rewards can be HUGE!
In virtually every single property you flip, you will run across SOMETHING that you simply didn’t expect. Whether it’s an issue that pops up 2 hours before closing that needs to be handled or a big surprise when you peek behind the drywall that you had to replace! You’ll almost always run at least a little over budget or hold it a little longer than you anticipated. But at the end of the day, you’ll have the satisfaction of taken an ugly house and turned it around and depositing a healthy check in your bank account.
Wishing you success,