A few years ago television shows abounded that showed all sorts of people trying to flip homes. Their failures and successes were recorded for the world to see as they purchased property, fixed it up and sold it for a profit. Or not. And that is what separates the winners from the losers. When it comes to flipping real estate, you’d better know what you’re doing because even simple mistakes can turn into financial disasters.
When the concept first became popular, the homes that were being flipped were usually in pretty bad shape. They had perhaps been abandoned for quite some time, or they had been condemned because of a fire or even a flood. These homes might be purchased from the actual owner or they might be purchased from a bank. In either case, the person or people buying the home assumed that they could completely rehab the house, sell it, and make a tidy profit.
In most cases this was true. The more work they could do themselves, the less they would need to spend on professional contractors and labor, and the bigger the profit at the end.
Before deciding what to do, you need to run your numbers. Do your research. An ideal flip would be an initial investment of about $40,000 for a house and then add $100,000 in repairs. You might need to completely gut the house, so be prepared. If all goes well and you designed it correctly in order to appeal to just about everyone, you might be lucky enough to sell it for $180,000 with a gross profit of $40,000.
Now take all your expenses out of this $40,000 (closing costs, broker fees for the sale, and maybe even some mortgage payments you needed to make because the project took longer than you had planned).
If you can walk away from a flip with $20,000 you did a great job! But even the real pros run into glitches and they need to walk away from flips before they lose everything. Too many surprises can pop up and no one could know about beforehand. Can you afford more than your initial investment? Can you pay the mortgage for a few months while it’s on the market? Along with money, can you invest the time to supervise what is happening?
Don’t go into a flip with a tight budget, no experience, and already having money problems. Flipping real estate is not your answer.
This article presented for you by these two sources of real estate news and flipping real estate tips.
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