Everyone dreams of the day when they will buy a house for a dollar and sell it for a million dollars. Well, that may be a little extreme, but if you have the means to buy that undervalued house and add a little value to it, you can make a nice return on your investment with just a little care and effort.
If you want to become a house-flipper, become a carpenter first, or get to know one that you can rely on to guide you through the initial steps of checking out the integrity of the house you are hoping to flip. If not, just go get a few thousand from the bank every so often and burn it. It’s the same thing and not nearly as painful or as much work.
Don’t worry too much about a hole in a door or a wall. Pay attention to the roof lines, the foundation and/or basement walls and floor. Look for mold. This can be a deal breaker on resale if you can’t fix it cheaply. Dirty is cheap to fix. Clutter can be quickly cleared. Watch for old fixtures, cabinets, etc. that won’t sell quickly without being replaced. It’s ok to replace them. Just make sure that you get the cost into your budget before the purchase.
Any remodel job requires you to figure the approximate cost and double it. Old plumbing or wiring or wall board can bite your budget quickly both in money and in time. If you don’t allow enough margin in your budget for a major overrun or two, you better stock up on your nitro pills and Maalox. You will need it.
If you’re not a real estate broker, hook up with a good one early on. You need his or her services now and at the end. A good agent or broker can sell a so-so house for a great price. A so-so agent will cost you more than you can afford in lost resale value. Develop the marketing plan before you purchase the house. It will help guide what you decide to do to the house and lot.
Unless the house is just a painter upper, remember that contractors you may use frequently have multiple jobs going. This means you may have to wait a week or a month for some of your contract jobs to get done. This can be much longer for items like custom cabinets. Make sure you have enough cash to outlast the waits.
Finally, if you still want to go through with this, get on good terms with your financier. Whether it’s a bank or a wealthy friend or investor, you may need extensions or additional money before you’re through. People and institutions that loan money are usually only nice when they’re sure they will get their money back with interest. If they smell a default coming, they will flip you and your house into court.