Thinking of Flipping a House?

So, what is ‘flipping’ anyway?  Flipping is simply buying a property with the sole purpose of re-selling it for (hopefully) a profit.  It’s not an exact science, but there are certainly a few considerations to make before jumping in.

First, what’s your budget?  There are two different budgets to plan for:  1. Finances  2. Time

  1.  Finances.  Remember, you not only need to buy the property, you need to have enough money to fix repairs, update, renovate, etc., etc.  Figure out how much you can afford and/or want to spend, consider ALL costs involved in the flip, and STAY WITHIN YOUR BUDGET.  One of the first mistakes beginner flippers make is going over budget.  Do your homework!  Look at comps.  What are similar homes in the area selling for?  Hope for top dollar but PLAN for bottom dollar.  What profit margin are you shooting for?  If you are shooting for 10-15% then plan accordingly and STAY WITHIN YOUR BUDGET.
  2.  Time.  Profit depends on turnaround time.  On average, successful flippers turn a property around within 90 days.  Budget your time accordingly.  The longer the house sits on the market unsold, the less profit you will make.  (Even if you aren’t paying interest on a mortgage, you are paying utilities, insurance, taxes, etc. on the property.)  If you work a day job and plan on flipping in your extra time, be very careful not to get in over your head. 

     

Next, what does the market look like?  Maybe now isn’t the best time to jump into flipping.  If the industry is slow or flat you stand to lose money.

Spend smart.  Where should you put your money?  Naturally, obvious issues should be addressed.  i.e. scratches, dings, dents, old paint, etc.  Fix all major problems like leaky pipes, electrical issues, etc.  Next, make walls, cabinets, countertops, etc. look clean and fresh.  Some spackle and paint will go a long way here without breaking the bank.  Beyond that, put your money in kitchens and master suites.  Pro’s will tell you these two rooms are typically where buyers make their decision.  Be sure to keep décor fairly neutral and spend wisely.  Just because you like those trendy drawer pulls that cost an additional $2/each doesn’t mean potential buyers will like them.  Update without going overboard.

The bottom line is this – don’t jump in before you do your homework.  Watch the market, ask a professional’s opinion, make a plan, and stick to your budget.

 

 

 

http://homeguides.sfgate.com/average-gross-margin-house-flip-49343.html

http://home.howstuffworks.com/real-estate/selling-home/house-flipping2.htm

 

Comment balloon 12 commentsJenifer Lower • August 19 2015 12:03PM

Comments

Great note to flippers Jenifer.  People think flipping is quick and easy! Just watch the 1st time flippers on HGTV they make so many mistakes! 

Posted by Tracy Lee Parker, Buy*Sell*Lease (RE/MAX Dallas Suburbs/PLATINUM PROPERTIES & MANAGEMENT) about 3 years ago

I think my biggest criticism of flips is that so often proper permits are not drawn for the work and professionals are not hired where necessary---even required.  There is nothing quite like going through the permit process and waiting for contractors to start eating up profits.

Posted by Charles Buell, Seattle Home Inspector (Charles Buell Inspections Inc.) about 3 years ago

Most of the flips I see are my amateurs putting lipstick on a pig. I do know some former home builders who do great work. Yes and the HGTV is a false reality TV version and not the real one. You can lose your shirt and hard money is unkind money.

Posted by Joe Pryor, REALTOR® - Oklahoma Investment Properties (The Virtual Real Estate Team) about 3 years ago

I think you either have a large bank account or must have some knowledge in the building trades to be able to flip successfully.  They guys on TV make it look so easy, it's not.

Posted by Chris and Dick Dovorany, Broker/Associate at Premiere Plus Realty ( Homes for Sale in Naples, Bonita Springs and Estero, Florida) about 3 years ago

HGTV makes it look so simple. It is not and some people are hammered when they find out their house needs way more work than they bargained for.

Posted by Sharon Alters, Realtor - Homes for Sale Fleming Island FL (Coldwell Banker Vanguard Realty - 904-673-2308) about 3 years ago

Flipping houses is not as simple as it looks. We often see flipped homes and it's easy to tell when they were done hastily and with a lack of quality. Buyers can tell also, and those houses just sit.

Posted by Kat Palmiotti, The House Kat (Grand Lux Realty, Monroe NY, 914-419-0270, kat@thehousekat.com) about 3 years ago

I am in agreement with Charles Buell ...good post and thank you

Posted by Richie Alan Naggar, agent & author (people first...then business Ran Right Realty ) about 3 years ago

Jenifer Lower Excellent points! Its not as easy as it looks on TV.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA about 3 years ago

And don't forget - at least in our part of the world, there will usually be two appraisals done prior to closing.

Posted by Bob Haywood, BobHaywood.com (McGraw Realtors) about 3 years ago

I completely agree with all of you.  Flipping is NOT as simple as people think.  Thanks so much for all of your input!

Posted by Jenifer Lower, Your Dream. Our Passion. (Bozeman Montana Real Estate .net) about 3 years ago

Jennifer - One of the most important things in flipping homes is to have a great contractor who can fix anything, are available and can work fast, and for a reasonable price. They can make or break any property when it comes to flipping.

Posted by Troy Erickson, Your Chandler, Ahwatukee, and East Valley Realtor (Diverse Solutions Realty www.ChandlerRealEstate.weebly.com) about 3 years ago

I've been down the flipping road and did it successfully, but it is not easy or quick. It takes a lot of research, homework, manual labor, and cha-ching (money). And don't under-estimate the "lipstick on the pig"! Sometimes all a house needs is a good cosmetic makeover.

Posted by Pat Starnes-Front Gate Realty, 601-991-2900 Office; 601-278-4513 Cell (Front Gate Real Estate) about 3 years ago

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