How to Flip Houses

Ever watch a house flipping show and wonder how they do it?  The good news:  it’s not difficult to flip houses even if you don’t have a huge bank account or friends in real estate. Here are six steps to real estate investment success that’ll save you money and hassle:

Start small when flipping houses.

Have you already forgotten the housing slump? To avoid taking too much risk remember that small homes weather market downturns better than mansions because people who can afford smaller houses generally make fewer purchase decisions based on the housing market or economy. A $70,000 house is likely to hold its value during a downturn. A $300,000 house might sell for $260,000. Even if both lose value, in a 10% downturn you’re only out $7k on a small property but you’ve lost $30k with the larger investment. Stay with small houses no matter how big a steal the mansion seems until you know what you’re doing.

You’ll need a good credit rating and some down payment money.

This is another reason to start small. A $50,000 house will require roughly $7,000 to purchase (10% down plus approximately $2,000 closing expenses and insurance). That doesn’t include the cost of getting the house into sellable shape. You should compare many banks before you sign any loan agreement. Don’t allow them to run your credit report until you’re ready (too many credit inquiries could affect your overall score). Remember to compare the interest rates offered, along with expenses, additional fees, and any prepayment penalty.   

You may be able to find investors to help.

A house flipper in Detroit, Michigan identifies houses and then finds investors to purchase the property. Then he cleans it up, works with a realtor to find a buyer and splits profits. The investor is ecstatic (their only task was to supply the money). It’s a dream come true for everyone involved. In this case the flipper didn’t need purchase money, only time and energy to find relationships by pitching financial advisors, mortgage professionals, and accountants on his project. Why? These pros are respected by many people with deep pockets….investors the flipper needs to know.

Learn how foreclosure works.

There are tons of sources for this information. State rules differ, but generally learn how to buy at a sheriff sale and efficiently evict the previous owner. If you don’t understand the foreclosure business all it takes is the time to read and talk to people in the real estate business to learn the ropes.

Learn refurbishment basics.

Three areas of the home that quickly increase value are kitchen, bathroom, and landscaping. At first get your hands dirty and renovate yourself. It’ll take far more time than hiring contractors. However, once you understand how to repair and improve you’ll save thousands when you hire contractors because you can talk their language.

 A quirky, unique look sells a house as much as expensive furniture and pieces.

Tour garage and estate sales to find “one of a kind” inexpensive pieces to show off your property. You should hire a professional stager one time to walk you through rooms and list improvements they recommend. Many pros will do this on an hourly basis if their only responsibility is to talk about what they’d improve while you record the discussion. This could cost as little as $50 or $100 and be invaluable learning.

Ignore most house flipping advice, especially “quick cash” pitches.

How many people really hit the big money without hard work? Paris Hilton was already rich. You’re going to need to get your hands dirty and find good, solid mentors and advice. Anything you find that tells you about solid financing, resale value, or the perfect location are best. Anything selling you on a get rich quick scheme should be avoided.

 Some good resources?           

Flipping Houses for Dummies

Flip:  How to Find, Fix, and Sell Houses for Profit

These tips are a great starting point to successfully flipping a house.  Happy hunting!