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Flipping Houses – A How To Guide
Flipping houses is an incredible way to make huge profits in a relatively short amount of time. I’m sure you have seen the shows, “Flip This House”, “Flip That House” or even “Property Ladder”. These shows all chronicle house flippers buying distressed houses, fixing them up and then reselling them and making insane profits. These shows tend to only show the most dramatic parts of the house flipping business and I can understand it. After all, it is television. Maybe some of the other details, like how to find these deals, how to determine what constitutes a deal and what are the costs they are not telling us about, are not very exciting, but these are the things you really must know before jumping into the real estate investing game. In this article, I am going to fill in the gaps and show you the things you should know if you really want to learn how to flip houses.
How To Find Cheap Houses That Are Perfect For Flipping
There are a myriad of ways to find houses that would make for a perfect flip. The important thing to understand is that you need to buy a house at a very deep discount. Think about who would need to sell their house and would be willing to sell at such a discount. The motivation of the seller is what we are really interested in. The sellers that are motivated to sell are the ones that are facing foreclosure, behind on property tax payments, going through divorce, inherited a property, people that have a house that needs too many repairs, someone that is buying another house and cannot afford two houses, a landlord that is sick of tenants, and the list goes on and on.
Many of the reasons for motivation can be found at your local county courthouse. Become familiar with the courthouse and where to find this information. Many counties now have their data online. Search the public records and find people with a motivation to sell their property. Send them a letter telling them that you are a local investor and you are interested in buying their property As-Is.
You can also drive neighborhoods and look for vacant houses. These are usually easy to spot as the yard is usually overgrown, there may be a broken window, there might be a lot of trash on the front porch, there might be old mail that has piled up, etc. Write down the addresses to these houses and then get online and search your county’s tax assessor website to see where the tax bill is being sent. Send them a letter stating that you would like to buy their vacant house.
What Constitutes a Great House Flip Deal
Once you have found a motivated seller that wants to sell their property, you need to determine whether it is a good deal for a flip. You will need to know what the house will sell for. Get in touch with a local real estate agent and inform them that you will be buying and selling houses and would like to build a relationship with them. Ask if they would mind running comparables for the property. They will be able to tell you what they think it should sell for fixed up.
Most real estate investors want to buy houses at 70% of resale value, minus repair costs. So you take 70% of the figure you were quoted by the Realtor and subtract the costs to get the house in sellable condition. This will be your maximum allowable offer. Do not offer more than this. You can determine the repair costs by taking several contractors by the house and having them give you bids. Most contractors will do this for free.
The 70% of resale value covers the costs you will probably incur while holding and selling the house. These are usually things like interest payments on any loans, utilities, insurance payments, Realtor’s commissions when selling, closing costs assistance when selling, property taxes and your profit. That last one is pretty important.
I hope you’ve learned something with this quick overview on how to flip houses and are well on your way to getting started flipping houses.
Danny Johnson is a real estate investor in San Antonio, TX that operates a blog about flipping houses, Flipping Junkie. He is currently allowing people interested in learning how to flip houses to follow along as he shows how he and his wife are marketing for motivated sellers, analyzing the leads that come in, talking to the motivated sellers, closing the deals, rehabbing the houses with before and after pictures, and selling the houses for profit. Check out the blog to follow along.
Top Myths on House Flipping
Many investors delve into the world of house flipping not just because of profitable margins but also because it is a very enjoyable endeavor. However, one must be careful before entering the realm because not all available information is true. Some are myths that may sound true because they are popularized. The next sections shall give you ideas on the top myths associated with house flipping.
You can’t flip a house when you don’t have adequate money.
The common idea among newbies is that house flipping can’t be done when you don’t have sufficient money of your own. This belief is absolutely incorrect because house flipping can be a partnership. You and other people can pool in their money to flip a house. Perhaps, you can have personal loans from other family members and friends and use the amount collected to flip the house you want. Money is all around you.
You can’t flip a house when you are not a handy man.
House flipping requires renovation, fixes, and rehabilitation tasks. However, it does not require you to be hands on with all of these.Some tasks can be done on your own to reduce costs but it is still not a prerequisite for a total house flipping.
Even the experienced house flippers tap the services of house renovation teams not only to reduce the effort but also because of the professional expertise imparted by these skilled workers. The pros can accomplish the tasks in shorter time frame. This translates to more money added to your savings.
There is a model house for flipping.
Remember that house flipping entails renovating and fixing flaws of a purchased house to make it more conducive for living. There is no model house for this because all homes can be flipped and sold. However, it certainly can help if you are to scout homes that have strong foundation and those that may require few fixes.
Flipping a house requires you to sell it.
While it is the general idea of house flipping, there are many things that could happen during and after the renovation stages. One such thing is the possibility that the flipped house would stay in the selling market for long. When this happens, the investor can resort to have the property available for rent.
After the renovation tasks, the house flipper can also fall in love to the flipped house. Such occurrence results in a strong desire to live in the house.
More than flipping and selling a house, an investor can also flip and rent, and flip and live.
Desare Kohn-Laski is a proud and experienced Florida realtor who is knowledgeable and familiar of the East Coast Florida real estate market. Some of the areas of her service include Parkland, Fort Lauderdale, and Hallandale Beach. Stop the chase for your dream house with her professional assistance. For more information, hop on to http://www.browardhomes.org.
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Before you make the big profits in house flipping you need to know where to start! To flip a house profitably understanding your real estate market is key to success. Markets can change by State, town, zip code and even by street. You can profit in any type of neighborhood if you understand the value of the home after you have made all the necessary repairs this is also known as the after repair value or ARV. When the house is ready for resale you will be listing it for your predetermined ARV.
To determine the ARV one needs to look at the recently sold properties in the neighborhood of the potential flip. If you know a Real Estate Agent they can assist you by utilizing the MLS to pull comparable properties or you can use a multitude of free websites to determine the ARV yourself. I like to use Zillow but I do not use the Zillow estimate if it where that simple everybody would be doing it.
How I use Zillow:
1. Look up the property by address.
We will use 81 Carl Ave as our potential property.
2. Click on the property address to view the detailed property page
3. Scroll down on the right side of the page and you will see “similar sold homes
4. Click on “Similar Sold Homes”
5. Now a table of sold homes will appear
6. Sort the table by distance
To make an accurate determination of ARV you want to compare only similar homes. The homes should be very close in square footage, year built, sold with in the last 6 months and within .5 mile of each other. Secondly but not as important are number of bedrooms and the number of bathrooms. I give these a little less weight because if most of the sold homes have 1200 sq ft, 3 bedrooms and 1.5 baths and the home you are looking to purchase is 1200 sq ft 3 bedrooms and 1 bath I would just carry adding a .5 bath in my repair costs. At minimum you should have 3 similar homes, do not use short sales or foreclosures because these will skew your numbers.
The three homes we will use are:
101 Carl Ave, $170,000, 8/9/13, 1344, 1961, .06, $126/sq ft
105 Carl Ave, $164,900, 4/29/13, 1514, 1971, .07, $108/sq ft
29 Baker St, $175,000, 2/18/13, 1420, 1978, $123/sq ft
If you are not familiar with the neighborhood you should drive by the comparable homes to verify that they are similar. You can see there will be variances in your parameters but a visual inspection can help to justify any variances.
Now to finalize your ARV find the average cost per square foot:
(126+108+123)/3=119 now multiply the average by the square footage of your potential house flip.
ARV=1449*119=172,431 or $175,000 to keep it simple.
At first determining ARV can be overwhelming but the more you understand your market and the more you actually work the numbers the more comfortable you will feel.