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So you want to make money in Real Estate

Sometimes I get calls from people wanting to buy a house cheap, fix it up and then put it back on the market for a big profit. This is often called flipping.  My guess is that they have been watching HGTV and believe it is easy money. While it is true that you can make money flipping a house, you need to make sure you have all the facts up front before investing your money.

If you are going to buy and sell houses in this manner for profit, you need to consider the following.

  1. Make sure you have enough capital to see the profit through. If you are getting a loan for the property, do you have the renovation money in cash? Or will you be paying cash for the purchase and the renovations.
  2. Work with a trusted and knowledgeable Realtor who will give you an accurate value of the property when it is repaired at the time of purchase. I like to give my investors a range and it is usually on the low side. Nobody is upset when they make more money is my thoughts. And use that Realtor to resell the property.
  3. Utilize reputable contractors and get permits for the work performed.
  4. Time is money so you need to get the house back on the market as soon as possible, but understand the rules of lending.  Certain loans that the new buyer may obtain can require that the seller (you) hold the property for 90 days minimum.  In addition, check to see if the neighborhood sells quickly or not. The days on market will affect your profit.
  5. If the seller (you) purchased the property and are selling it for twice the value—this is not hard to do, because they do not take into consideration the money spent on the property to bring it back up to condition—a second appraisal may be required. This is a seller’s expense.
  6.  Beauty sells but the mechanics of the house are important. The buyer will most likely get a home inspection. Generally the buyer is going to want the house to have the repairs made that the home inspector finds. Make sure you address the issues an inspector may want repaired.

When I work with investors who want to flip a house, we always ask how much will the house sell for when it is finished, deduct the cost to sell the property—relator fees, closing costs, etc, deduct holding costs. Next what do we think it will cost to repair; deduct that from the sales price and the difference from the purchase price is the profit. You will need to determine if your time is worth that amount of money or not. If it is then you have a good candidate for a flip.

I am an investor and have worked with several investors over the years. I feel the knowledge I bring to the transaction has value and gets the properties sold fast. If you are looking to buy and sell, please feel free to contact me at 405-213-2992 or visit my website http://www.sandiwalker.net

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