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Thinking About Flipping House
Hey guys; thinking of flipping property? A great way to make money, right!? Those TV shows makes it look so real and easy that anyone can do it. Lets just take a step back and see some of the pitfalls and wins of flipping a house so you don't end up in a flop as we did in one of your renovations.
We have owned several homes and each one of them we made improvements. We wouldn't call ourselves flippers but in a way we do flip while we live them. Here I will share what we have learned from our experience.
Location and condition of property -
Location was key and we did our due diligence in finding the best area we could afford. Things we looked for were up and coming areas and established communities where pride of ownership was visible. Some properties just needed updating so we went with those. We were careful if it needed many major repairs and stayed away from those. We also were careful not to plan on over-renovating as that would be a pitfall. For example; flipping a house and ending up with a price tag of at $475,000.00 in a $300,000.00 house neighborhood. No one will want to buy it at that price and you will flop.
We always had a general inspector during the option period which gave us the nitty gritty on the house. Some flippers do major renovations and get inspectors that are specialized such as roofers, structural engineers, foundation, electrical and even plumbers to determined the cost. So you can see how easy the cost can go up pending the condition of the house.
Cost of home -
The cost of the home is always a factor and it adds to the bottom line. A comparative market analysis(CMA) is completed by a real estate agent such as my self, Awilda Caberto. It provides prices on recently sold homes. On another note homes that sit on the market for awhile are good properties to look at because sometimes all they need is a good clean up and maybe a few minor upgrades that often buyers don't have the time to do. Many properties that sit on the market start dropping their price on a bi-weekly bases it shows sellers are wanting to sell quick.
Cost and time of renovations
Being that we were buying a home to live in we did not look at it from a flippers perspective. Now that we look back we wish we had. Here is an examples of one of our flips. House was in Chicago in an older established neighborhood built in 1957. The house already had two additions however the kitchen was poorly designed and the laundry room was in the basement. We purchased the home knowing that we would have to redo the kitchen, bring up the laundry room plus do some landscaping. After living in the house for five years we finally decided to do the renovations failing to notice economy was about to crash. (I was not in real estate at the time). We gutted out the kitchen, put new windows throughout the house, brought up the laundry room and did the landscaping. We thought we were sitting pretty and would get a good return after living in the house for ten years. At our ten year mark we sold it. It was a huge flop for us. The economy had crashed and all of our hard earned monies and efforts we put in the renovation did not payoff. We actually sold the house less than we originally purchased it for.
Listing and marketing the home
Listing agents are great on getting your house on the market and promoting it. The $$% commission the seller pays is split between the two agents and their brokers. Its a win for everyone. Flippers want to get that house on the market right away...timing is important. The clock is ticking and another month the house sits on the market is a profit loss. Dress-up the house and do open houses. Send flyers out and engage buyers to come and see the house. If you updated with nice stuff you will sell the home quick.
The sale....did you make a profit
Profit after the sale. We had several good ones. I'll share one we did in Texas. It was a new construction, made to order, which was an easy purchase. We lived in it for five years. We made sure to take very good care of it and invested in major landscape front and back, painted the house with very high quality paint on the inside, added upscale solar window shades. So would you call this a flip? Maybe? Our target was to sell at top dollar and work on getting the market to give us back what we lost in Chicago. And we did!! The buyers saw the value of what we had in upgrades plus what we added to it. The buyers did not hesitate on offering top dollar for the house.
Take away for New Flippers: Study the market, measure your built project timeline and stick to it, know upfront what you are going to flip and how much it will cost, create a tracking form of some sort, do not over renovate, know your subcontractors well and their availability and what can you do yourself to keep cost down. Renovate the areas that are most important for buyers such as kitchen, bathrooms walls floors, open a wall here and there and so some landscape. A good eye for these areas will help you determine between a clean up, semi redo and a complete knockdown and redo.
Looking for some flipper homes consider theses in the Austin area
I am based in the greater Northwest Austin, TX area and I am determined to be the real estate consultant of choice and have some fun while we are looking for your next home or Lot. Just to share a b....