Many real estate investors have generated their largest profits by “flipping” houses. Flipping houses is the act of purchasing a distressed property below market value, making necessary repairs and then reselling it for a profit. Before you begin this type of investment, however, there are six things that you must understand about this type of investing so that you make the largest profits.
Familiarize Yourself with the Neighborhood
Before purchasing any home, you will want to familiarize yourself with the neighborhood. Is the property distressed because the neighborhood is failing or because the current owner has fallen on hard times? A distressed neighborhood could result in your investment losing money instead of turning a profit. Always take the time to look around the area where you are thinking of investing.
Know the Prices for Homes Selling in the Area
When you found a home that you are interested in purchasing, complete a little research about similar properties in the area. You want to make sure that any property that you purchase, plus the cost of repairs, can still be sold at a high enough amount to turn a good profit. Just because a home is listed as distressed, a short sale, or in foreclosure does not guarantee that the asking price is a good deal or will provide you with a profit.
Make an Accurate Bid on Property Based on Potential Repairs
When you are bidding on any property, you want to make sure that you take into account any potential repairs you will have to make on the property. Some of these repairs may not be obvious. In most areas, a home will have to be up to code before it can be resold. It should be noted that many homes sold at auction are not able to be viewed on the inside prior to bidding and are sold as-is. Bid carefully so that you are not investing too much into the property either by cost or by repairs. If you need help, contact a flipping expert at a program like Success Path with questions.
Research the Property Title if Possible
Prior to making the purchase, you may wish to do a little bit of research on the property either through a title search or through court records in the area. Properties that have liens against them are almost always the responsibility of the person who owns the property, whether or not they are the person originally responsible for the debt. There may also be back taxes owed on the property that will add to your overall costs. Always check before buying.
Have a Contractor Available to Begin the Project Immediately
The way to make the largest profit on flipping a home is to flip it as quickly as possible. Many investors use interest only mortgages to purchase these homes, and the grace period for paying interest only expires quickly. Have a contractor available to begin repairs the minute that you receive the keys to the property so that it can be ready to flip as soon as possible after purchase.
Start Looking for Buyers as Soon as Repairs Have Begun
As soon as the repairs have begun on the home, you should aggressively start looking for a buyer. Marketing the house in this manner will help you sell it as soon as it is complete. Again, the way to make money flipping houses is to do so quickly so that you can continue to purchase distressed properties at a fast pace and generate a good profit throughout the year.
Following these six tips will help you get a good start at being successful in the real estate investing sector. When done correctly, house flipping can be a very lucrative profession.