Top Myths on House Flipping

Top Myths on House Flipping

By Desare A Kohn-Laski

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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After Repair Value (ARV): A Key to Successful House Flipping

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.

zillow insturction 1

2. Click on the property address to view the detailed property page

zillow insturction 2

3. Scroll down on the right side of the page and you will see “similar sold homes

zillow insturction 3

4. Click on “Similar Sold Homes”

zillow insturction 4

5. Now a table of sold homes will appear

zillow insturction 5a

6.  Sort the table by distance

zillow insturction 6

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.

House Flipping is Simple but Not Easy!