Real Estate

Flipping Homes–What does it take?

People who take old homes and rehab them for a profit are called flippers. Flipping homes can be a good way to make money; however, like every other business there is a risk. I believe that several tv shows have made flipping look like easy money which is not always the case.
In order to make a profit on a rehabbed house you need to have enough of a spread between the purchase price and the sales price. I believe the best way to estimate this is to work backwards from the potential sales price. I am also conservative on what this price will be. Let’s face it if you sell the house for more, then it is a bonus.
Working backwards looks like this.
Example:
Sales price when house is completed………………..$150,000
Cost to sell the property (10-12%)…………………….$15,000-$18000
Cost of repairs……………………………………………………$25,000
Holding costs (interest, taxes, utilities, etc)………..$2000 Can vary depending on how long you hold it.
Break even point……………………………………….………$108,000-$112,000
Cost of property including closing costs, etc………..$90,000
Profit…………………………………………………………………….$18,000-$15,000
Sometimes people new to flipping will tell me it shouldn’t take 10-12% to sell a house, but by the time you pay an agent to sell it and the title work and give something to a buyer, it becomes this amount. And let’s face it if it is less then you put more money in your pocket.
Same thing for repairs, things come up along the way and cost more. So make sure you have a little slop in the amount and you are not figuring the cost so tight that you end up losing money.
Please know that today you are probably going to have to do more than simply paint and replace carpet to make a profit. You are going to have to update kitchen and baths, open floor plans. People will pay more for nice finishes but don’t forget to make sure the roof and foundation is good. They also want the mechanical systems of the house to function properly and be updated.
Having a realtor to guide you and helping you can be incredibly valuable. I have personally rehabbed several homes and helped several investors in flipping homes. If you are interested in investing in real estate and would like some help please contact me at 405-213-2992 or sandisellsokc@kw.com

One thought on “Flipping Homes–What does it take?

  1. Hello Sandi,
    What would be the pros and cons of buying a foreclosed home to occupy and not flip? I’ve seen homes advertised under $100,000 sold as-is.

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