Tips for Flipping a House

So you want to get into the game of flipping homes and you don't know where to start or are worried you don't have the knowledge to be successful despite your time watching numerous "flip this house" episodes on television? Don't fear, your real estate expert is here! :) Okay that a bit much I know, but in all seriousness I have a list of tips that can help. I have flipped homes and have experience in this. While its often made out to be glamorous and a sure fire way to make money, its often not broadcast to the public when someone gets in over their head and makes what could have been a successful flip a money losing nightmare! Follow these tips and you'll have a better chance at being successful!

1)Know Your Market - Working backwards, what is the market value for the home your looking at when its finished? A clear idea of ARV (after repair value) is necessary to make an educated offer on a property. Taking a guess that you'll sell it for 25K more than what you put into it is dangerous. YOU don't decide what the home is worth, the market does and knowing this in advance is a must. Once you know the ARV, subtract from this all the costs you have, including price, repair costs, holding costs, buying costs and costs of selling. Now subtract the profit you want, and you have the highest price you should pay. Start with an offer lower than this number and then go for it. If done properly your on your way to a good start!

2) Timeline - Its vital that you have a schedule in mind for start-up and completion of the work. More than a handful of house flipping projects have gone wrong due to falling behind schedule. For example, if you think you can get the electrician/plumber in the first week and they don't make it for a month so you can close up walls, everything else can be thrown off. Meanwhile your spending 2000 per month on holding costs like loan payments, utilities, property taxes and insurance. So be sure prior to finalizing the offer that you know how long it will take to have all necessary work and contractors jobs performed. Also, as a tip be sure to have all contractors sign a completion date expectation form as part of their contract with you prior to starting.

3) Necessities First - On a "house flip" show a couple is running over budget by about 10 thousand dollars on their first fixer upper investment and are also behind schedule! Yikes, not a great start right? They run out of money and put the home on the market AS-IS with a yard that could use a face lift and some unfinished painting on a few walls. Of course buyers are going to see these things first and the home is making a bad first impression. Avoid this mistake by taking care of those things that are most important first, with an emphasis on items that lead to first impressions like curb appeal and paint, flooring etc..Then if you run out of money or time, you've already done some of those key items that will help the home sell. If not done properly, buyers see an unfinished product and a lower offer is expected or it will sit longer, adding to your loss.

4) Know your ROI on Improvements - Your return on investments for all improvements should not be a guessing game. The ROI for each possible improvement should help you determine what you do to the home. You may guess a little at times but the principle is that you do only those things that have a direct correlation to the value of your home increasing. What ROI improvement vary based on each home and area but often include flooring, paint, landscaping and sometimes finishing unfinished space. With a small house, new carpet, paint, landscaping could run less than 7K and add as much as 14K as an example.

5) Know Your Buyers - You should know pretty typically what your end buyer is like. If your in a senior neighborhood, don't expect you'll be selling your home to first time home buyers that are young! Know what type of buyers are likely to want the home (and neighborhood)before you start. Then, after improving it with those buyers in mind, market it appropriately. You or your agent should identify and advertise the benefits that matter to your buyers, whether this includes "close to shopping/stores", "country living" or transportation etc.

6) Price - Ah yes, the very vital question..."what do I price the home at when its finished?" Selling fast means you save holding costs and have cash in hand to do your next project quickly or you may have other projects waiting on that money. Either way, price your home aggressively. If the typical home in that area sells for 150K, price it a few thousand below that. While you may feel like your giving up 3 or 4K of potential profit, you'll probably save atleast that in carrying costs and lost opportunity costs. Purchase the home right and use the other suggestions here and there should be plenty of money left for you!

Hope the above offers you some insight to the game and life of house flipping. As always, please feel free to forward this blog to anyone you know and chime in with your own thoughts and ideas on any of my blogs. Thanks for viewing and have a great day!