How to Buy a Flip

One of the hottest trends in real estate investing is house flipping. House flipping is simply buying a house at a lower than market value price, sometimes renovating it and then quickly reselling at a higher price for a decent profit. It is especially attractive to amateur investors. While house flipping can bring financial rewards, it is also high-risk. Thus, every investor should take a few things into consideration before taking the plunge.

Map out a plan. A good plan is essential. House flipping is just like any other business and requires a solid business plan. You need to know what you are getting yourself into. If this is an investment strategy that you want to pursue, you need to take a serious look at the facts. Investors who go into house flipping unprepared are probably going to lose money.

Know your potential market area. When you are flipping houses, you often need to make quick decisions. You need to know your market. You need to familiarize yourself with the neighborhood. You need to have basic knowledge about market values of similar properties in that neighborhood. Find out what kind of houses sell quickly in that area, what features are important to most buyers, how long do houses take to sell. Know as much as possible about the market you have chosen, the better decisions you can arrive at when it is time to buy.

Shop around for the right property. Once you have chosen your target area, you need to take a close look at the available houses. Make sure you look at the location of the house. Will you be able to sell the house once you have renovated? Find out the condition of the house. How much work and what kind of work need to be done? Find a house that will work for you financially and from a management point of view.

Set a budget for the amount of the home purchase. Once you know your market, you need to set a budget for buying a house. When you find a house that meets your criteria, make a realistic offer. Factor in mortgage fees, attorney fees, closing fees, titles, consequential taxes on the offer. Do a bit of haggling. Do not despair if the negotiation bogs down. There are others.

Have a thorough home inspection. Once you have found your property, do several walk-through with a home inspector or handyman especially if you are new to the business. An inspection is a must. It will reveal any major electrical, plumbing, pest or structural problems. Buying a property without inspection can spell the difference between profit and loss.

Stay focused on a house that needs only cosmetic work. This is especially true when you are a novice flipper. Look for a house that just needs cleaning up, painting or new flooring. Curb appeal problems such as a messy yard or unattractive landscaping can be fixed easily and inexpensively while still increasing the value of the house. Avoid a house that needs structural repairs.

Set a limit for the flipping process. After several walk-throughs, you should be able to determine the repairs needed. Make a list of the things that must be done such as painting; things that should be done to get a reasonable selling price and things to be left alone. Next obtain estimates. Finally, create a budget. Factor in not only renovation costs but also closing costs, permits and licenses. Be sure to add a certain percentage for cost overrun.

Determine which of the work you can do yourself and which to hire out. In a perfect flip set-up, you need to do as much of the work on the property yourself because contractors eat profits. But not every one is a builder. Be realistic about your skills. If you do not know or cannot do something, hire somebody who does. 

Work with a professional real estate agent. A good realtor can help you understand the current market condition in the neighborhood where your flip is located. He/She can help you determine the proper price for a maximum profit for your flip. He/She can also help you sell the flip faster.

Know how much to sell your flip. When you sell, it is imperative to price your flip right. A property priced high too high will scare potential buyers. You want to make a good profit but you also want to sell quickly. Under-pricing slightly can be the bait you need to lure buyers.

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