Flipping Houses: a type of real estate investment strategy in which an investor buys a property to then sell to another buyer at a higher price. Profit can be gained from 1) buying low, then selling for a higher price or 2) increasing value by making repairs, improvements, rehabbing. This strategy is normally done within a short amount of time, most usually between one and six months.
Flipping houses for profit can be a great way to make (relatively) quick cash in a short amount of time. How does it work? 1) Find a good under-market-value property that needs work, 2) fix it up, and 3) sell it for a profit. There's a lot of research and planning that needs to go into a successful flip. For anyone new to this business venture, we highly recommend doing LOTS of research and reading on the subject, and learning how other people's attempts at making money with flipping houses have failed. It IS possible to make great money flipping houses, but it's essential not to go into this business venture without arming yourself with all the information, careful planning, and resources from which you'll need to draw.
BEFORE you start looking at property, you need to make sure you can secure funding. If you are paying cash, that can make for an easier, quicker sales transaction. And often in the distressed or foreclosure market, cash buyer win over buyers that need to rely on financing.
If you need to secure a mortgage, make sure you have good credit history in order to obtain the best possible interest rate. Interest rates for investment properties are typically a little higher than for owner-occupants. Since you are planning to fix and flip, you are an investor. Get your credit score up as high as possible before you apply for the loan.
There are government loans that do allow buyers to additionally borrow money to pay for the repairs and improvements to the property, but they usually require a commitment for the buyer to remain living in the home for a certain amount of time after the purchase of the property. These programs are worth looking into, but generally not geared toward the flipping professional.
Make sure, at this point, you've gone far enough into the loan application process to know the price range in which you should be looking for a property. If you are a cash buyer, make sure you keep your set amount of cash aside without touching it. As soon as you find a good property you want to put an offer on and purchase, you'll need to provide PROOF of funds, OR PROOF of funding and either of those will have very specific numbers on them that you'll need to adhere to!
Once you have a plan for financing, and you know the price range in which you are looking... it's time to start the search. There are various ways to find the best candidates for the flip. Start with government auctions and foreclosures. If you know the neighborhood or area where you want to focus, look for vacant distressed properties.
Create a list or spreadsheet and include all the properties you are interested in, so you can start doing your due diligence. Start your search with that governing county's property search website. Find out who owns the property and write that information on your list. If it's bank-owned, try to find a contact name, number, email for the manager or attorney handling the property. On that site you can most likely easily find out if the property taxes are in arrears or paid in full.
Then try to find out if there's a condo/homeowners association, and if there's any liens against the property for back dues owed. Check the county's civil court site to try to find any addition recorded liens or other litigation involving the address or owner.
You can also ask an experienced, licensed Realtor for assistance in finding good property. Their service is normally free to buyers... their expertise could help you find property you may not be able to find on your own. They have access to REOs, foreclosures and distressed properties.
Make sure you keep track of all possible money could be owed with the purchase of the property... because once you close, creditors will come looking to collect. Those liens and money owed don't get wiped away with a new owner. And that money could cut into your profits significantly.
If you are working with a realtor, they will help you through the entire sales process from the sales contract, inspections, condo/HOA docs, re-occupancy etc through to closing. If you are handling it yourself, make sure you use an attorney or a great sales contract and title/closing company to get you through to the end successfully.
Flipping houses is a business, so all of your expenses should be a tax deduction. This of course is conditional on this NOT being your primary residence, and we do advise seeking the advice of a good tax preparer or CPA. Keep track of all of your expenses including inspections, title search, condo/HOA docs, closing costs, commissions, etc.
Once you own a house to start fixing, to flip... it's most important to develop your budget. Call in professionals that give free estimates for things like the AC system, roof repairs, flooring, painting. The more free estimates the better. Put the must-do repair estimates and details on the TOP of the list.
The more specific your budget is, the better. There are MANY way to save money without compromising quality... but it all takes research. The most successful people flipping houses are the ones that can do a lot of the work themselves, or at least know enough about construction, rehabbing, home improvements and home staging to make the best choices and spend money wisely.
When flipping houses, the longer you spend fixing the property up, the more profit you are losing. The goal is to fix and flip quickly. This means making sure the repairs and improvements are all done in the most strategic order possible, to ensure that the end stages while work is still happening you'll be able to start marketing the property for sale. Let buyers see it's almost done - that's perfectly fine. But you don't want the property to be finished, and sitting vacant and for sale for months after. You'll see your profit dwindle very quickly.