Flipping Houses for Profit – 3 Important Steps

house-flip

The flipping of houses can really be a quick way to create wealth as long as the flipper doesn’t let the “flippee house” take over his life and bank account.

The number one equation to take into account on this project is the margin. What is your cost to get into the house and the average sales price of a house in the selected neighborhood on a remodeled home? Obviously, you want this margin to be as high as possible. The challenge in today’s market, when looking at it nationally, is that many of the diamonds in the rough are located in areas where prices are still declining, so the investor must be sure to purchase the house, gut out the old, insert the new, and get out of the house before the declining price catches up with him and his profit.

Successful flipping is all about your margin. I would love to give you a set equation with fixed expenses, but every house is different. One house may need a kitchen, another, the kitchen and two baths. Here’s a pretty cool calculator online that can help determine your cost at www.RemodelingMySpace.com. With the flipping I’ve seen done in our market, it seems to be pretty accurate on its estimation of replacement costs.house-flip

Below are 3 basic steps to consider when you are ready to flip a house:

Step 1:

The first step in any real estate decision is to decide on your budget. Make sure that any loans being taken out will be paid back on time regardless of how well the property sells. If you stick to your budget you will greatly raise your chances of undergoing a successful house flip.

Step 2:

Take into account all of the fees you will need to pay. These fees include lawyer fees to ensure all contracts are in order and loan fees from your lender. Be sure to add these into your budget and although in some places you may be able to cut them out I would not suggest this as the peace of mind from having hired a professional lawyer is well worth the price and could help you undergo a successful house flip.

Step 3:

Set up a clear start and end date for your project, then begin looking for properties that would fit into this deadline. Be realistic when looking at properties to determine whether or not you would be able to do the work yourself, do you have the skills, do you have the time? Before purchasing any property hire a professional house inspector to look over the building.
Follow these steps and you should be well on your way to making a successful house flip and taking direct command of you finances.

Sources: M. Anthony Carr and M. Esther Sherman.


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4 responses to this post.

  1. What a pleasure to know that other people do the similar DIY house renovation projects. Thanks for advises, they are quite considerable, especially for starters. Actually, we made flips too and have pictures to illustrate.

    Reply

  2. Before you have the house renovated, always check if the contractor you’ve hired is licensed. Hiring a sub-par contractor could mean the difference between profit and problems. Make sure you have a contractor with all the renovation estimates before you purchase the home. Hire someone you can trust, someone you know is experienced, and someone that comes recommended by people you know.

    Reply

  3. Posted by danielrealestateinvesting on December 1, 2009 at 11:07 pm

    If you really want the best deals in investment properties, you have to increase your odds by finding more deals. Who is more likely to get a cheap apartment building, an investor that looks through the MLS listings and calls it a day, or the one that uses ten resources?

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