Want to Flip a House!?
Want to flip a house? There’s a lot of misconceptions when it comes to rehabbing properties – it isn’t like reality TV. So what are some things to be aware of when starting out in the real estate market?
First off, if you’re serious about getting into the rehab business, be aware that it is just that: a business. You are buying ‘materials’, creating a desirable ‘product’ from those materials, and selling it for a profit. If you have this mindset, it will help you as you plan and make decisions.
When you’re trying to decide what kind of property to get, look for houses that will give the most profit. Keep in mind you shouldn’t expect or waste time trying to get the maximum out of a property, but you should get one that has a lot of potential. The best areas for good deals are the ones that were hit the hardest by the downturn. For example, if you can snap up a property for $50,000, make repairs with a budget of about $25,000, and sell the house at a value of $125,000, then you have a good deal. But buying a house for $90,000 that no amount of improvement will raise the value won’t get you a profit.
Don’t get turned off by big repair jobs. If you can get a foreclosed home for a really good price, the money made on the rehabbed house will more than cover the costs of fixing it up well. Many buyers are discouraged by damaged properties, especially bathrooms and kitchens. But because most prospective home buyers won’t consider properties that aren’t in good condition, it drives the price down and actually increases what you get out of the sale. It may still seem like a lot of cash to spend trying to fix up one room, but it’s probably not as much as you think it is. In general, a bathroom rehab usually cost only about $2500-3000 in materials and labor. Even termite damage is not that big of a problem, although it’s a major red light for people looking to buy and move in. Wood is actually a relatively cheap repair to do.
Another myth about rehabbing is that you, as the owner/investor, have to be at the property all the time supervising. If this is the case with you, get a different contractor. You should have a good relationship with your construction crew. Read ‘Hiring a Contractor? Read this first!’ When you first start out, you’ll have to check around to find out who’s the best in your area. But once you and your contractor get to know each other and you’ve established how things should be done and how they should look, it should be a hands-off process. All you’ll need to do is check up on the work every once in a while and see how it’s going, just make sure to keep deadlines in your contract and that payments are disbursed after work is completed to ensure work is done in a timely manner.
Keeping these pointers in mind, you should be able to flip your own property. Remember the first time is going to be the hardest. When you find the right people to put in place and the more you do it, the easier it becomes.
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