Good to know when flipping houses
Many potential investors/flippers assume that they can simply
1) Buy a house,
2) apply a fresh coat of paint,
3) Trim some bushes, and then
4) Resell the home at a profit.
Unfortunately, “flipping” is not that easy, there are several key people and skills that every potential investor/flipper should have in place before even considering entering into a real estate transaction of this nature. Here are the top five “must-haves” you’ll need to succeed in this endeavour.
1. A Group of Experts
While a house flipper can certainly go it alone, it will certainly help to retain individuals that are familiar with the legal, accounting and construction ramifications of flipping houses. Flippers typically work against the clock, so they must renovate a home on budget and then turn it around and sell it before the financing costs eat up their profits. In any case, a bevy of experts including a real estate agent, a lawyer, a contractor or renovator, an accountant, a home inspector and an insurance agent can ensure that the work is completed in a timely and efficient manner.
2. A Handyman or Knack for Home Improvement
House flippers that make the most money buying and selling homes tend to be handy people. That is, they have the ability to step in and lend a helping hand when time or money constraints kick in.
Why is being handy so important?
The obvious answer is that if you can do the work yourself, you won’t have to pay someone to come in and do it. However, there are other advantages to being handy as well. For example, there are times when it will be impossible to get an electrician to install an attic fan on short notice. There are also times when a job must be completed without warning at the last second in order to obtain a certificate of occupancy. In these instances, having the ability to navigate your way around a tool box is very valuable.
3. Location, Location, Location
The Investor/flipper should research the area in which they intend to buy property. The Investor/Flipper should know what characteristics (acreage, number of rooms, type of home, etc) are the most desirable in the area to buy in. Equally important is knowing what houses in the general vicinity have sold for and if there is likely to be any future development in the community (such as a new school, condominium or shopping center) as this could affect supply and demand. The Investor/Flipper should also not alter the outside of the home dramatically that it becomes obtrusive but rather bland in with the other homes on the street
4. A Good Estimator
By definition, house flippers attempt to buy a property and then resell it at a profit in relatively short order. In order to do this the Investor/Flipper must make some structural and/or cosmetic changes to the property thereby making it more appealing to the next buyer. If the Investor/Flipper underestimates the costs associated with the project he or she may be exposed to large monetary losses. Therefore, a flipper should be familiar with construction materials (their use and their cost), as well as local construction codes, the cost of local labour and the time it should take to do a given job.
5. A Dose of Patience
One of the biggest obstacles to making money in the real estate market is that Investors/flippers tend to overpay for a given property.
Why do buyers overpay?
Typically, buyers become emotionally attached to a property or develop some kind of bond with it, which in turn forces them to enter into a contract on less than favourable terms or spend more money then was budgeted for. However, savvy Investors/Flippers have the ability to avoid emotional purchases, and the desire to find diamonds in the rough and properties on the cheap. They also understand that if they aren’t buying a property at a favourable price and with favourable terms, it makes sense to simply move on to greener pastures. The bad news is that patience is a difficult virtue to teach and hone. In general, either you have it or you’ll lose a lot of money trying to learn it.
The Bottom Line
While quitting your job and becoming a full-time house flipper may sound like an attractive proposition, be sure that you have these five “musts” before investing in a real estate project.
Ebrahim Suliman
Sales Representative with Signature Service/GMAC Real Estate
www.yourcondospecialist.com
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