Watching the show “Flip Men” on Spike has reignited the idea of flipping a house for me. I have been interested in buying and flipping or looking for a property to buy and rent for some time now. Not being much of a handy man, this idea is quickly dismissed, but can flipping a house be a profitable venture for someone like me? What about someone who knows how to do house renovations on their own? There are a number of things people need to keep in mind if they are going to flip a house. We discuss four below:
Buying the Right Place at the Right Time
The housing market goes up and down, following a boom and bust cycle just like every other investment, so keeping track of house prices and how they are changing is important. It is also important to find a place you know will be profitable. A foreclosure may mean a lower price, but you might need to have the upfront cash first because banks won’t finance foreclosures. Most of your money can be made by finding cheap properties for well below market value. If you like a property but cannot get it for the right price, it is best to move on. After all, you won’t make a dime if the numbers don’t work in your favor.
Know What You Are Getting Into
This is the first point I need to take into consideration if I were to go into house flipping. I don’t know much about renovating houses. Is flipping a house possible? Do I know the right people? Would paying others to make fixes still lead to a profitable business venture?
You need to consider how you will go about renovating each part of a house before buying one. It is a large financial undertaking and must be dealt with delicately. There are laws put in place by FHA to make getting a mortgage for houses sold within 90 days of purchase more difficult, but holding houses for longer periods of time may cost you more money. There are a number of pros and cons you need to consider.
David’s Note: Again, it boils down to the numbers. Is the risk/reward in your favor?
What Should You Fix?
Flipping a house entails fixing a number of different things. Many people will say finding a small job for your first house would be wise. Ensuring that everything is in working order will be important, because you have no chance of selling for top dollar without a properly functioning property. Fix the roof first, take care of curb appeal last and fill the middle with everything else. If your house doesn’t appeal to potential buyers from first glance to last, it may be on the market longer than you would like. A well staged home can go a long ways too, so don’t toss the idea aside as a money waster.
Is It Plausible?
Flipping a house for me right now wouldn’t be a great idea. I move every six months and I don’t know the first thing about renovating. If I had a permanent home and could contribute to the changes in the home, it would be something I’d consider. Have you had any experience with house flipping? Is it something you have considered in the past?
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“Buying the Right Place at the Right Time”, Yeah my friend was doing this for years and made good money from it up until 07 when the housing market went downhill. They then had to pay out of pocket for house they were working on at the time and lost a lot of money.
I know of a group of remodeling guys that flip houses in a niche ‘under $50k’ market. They buy the house for $20-30k from a bank or the city (who are more than happy to offload the property), put $10k into superficial renovations, then flip it for a profit.
I buy and sell apartments and villas if they are cheap, I make only a cosmetic facelift, painted and tidied the item, and fixes to the garden as sputtered are lagging way behind. People buy most often with my eyes, they look not so much on quality.
I can see myself doing my own renovations when I buy my next house. The first one I bought needed minor renovations and was well maintained. So I was fortunate to find a home that was well taken care of.
If I had the resources I would Luke to give it a try but I have a feeling I’d get beaten by the true investors who know their exact profit margin. I also don’t have the proper amount of time to devote to it. It is fun to dream though!