So Your Search For "Houses Flipping" Just Brought You To The Perfect Site…
Reduce Risks And Increase Profits By Getting Critical Advice From Storybook Properties!
Congratulations! Your keyword search for houses flipping brought you to the best site you could ever have hoped for. Buying ugly homes and fixing them in just the right way can be extremely rewarding!
There is nothing like seeing the transition of the most dreadful home and property evolve into a breathtaking beauty, ahhed by everyone that enters it. Knowing that you, yourself like an artist first envisioned it and then created every detail. You are the one that can make it all happen!
How and Where to Start with Your "Houses Flipping" Journey
Start small. We cannot stress this enough. There is no need to bite off too much. You can make a $50,000 profit with a $100,000 investment just as easily as a $200,000 investment, so why risk more with a higher loan liability or cash output when it's not necessary?
Always remember that it's all about numbers, more buyers qualified to buy your flip at affordable housing price levels will turn your flip quicker and finally, don't get personal."You are not going to live there"! Treat your flip as a business.
Begin by searching and analyzing sales data in any area or neighborhood that interests you. Remember to keep it conservative by starting with an area where homes are selling at the lower end as long as there is still good activity noted by many recent sales closings. Activity and demand is key.
Get an idea of what a particular property and it's features would most likely bring or sell for. For instance, if the data shows that there were 10 homes that sold in the past month at a range of $150,000-200,000 and 7 of those homes were 3 bedroom, 2 bathroom, 1,500 square foot residences in which those 7 sold between $190,000-200,000, then you can reasonably conclude that a property with similar features would bring a future sale within that range.
Don't even think about getting greedy and trying for more when it comes to "houses flipping". This will more often than not turn around and bite you! Even if you got lucky and snagged a buyer for let's say $10,000 above market value or what the closed sales data support the property value at, the property would most likely fall short when your buyer's lender requires an appraisal. There goes your deal! All lenders require property valuations that must meet specific appraisal guidelines.
It is also good practice to review and analyze current listings of similar properties of similar conditions. This is beneficial for several reasons. First, you need to be aware of your competition. If there are other similar properties to yours being offered for less, wouldn't you want to know? Good strategy would be to list your "houses flipping" project for just a bit lower in hopes that yours would bring an offer before any of the others.
Further, an analysis of lower listings can indicate a declining market if active listings are priced less than the closed sales. In this case, be more conservative with your flip. If your margin for profit is skinny to begin with, you may want to reconsider initiating the project. If active and pending listings are higher than the closed sales, this is more of an indication of a stable or possible rising market.
However, do not be quick to determine a rising market as most listed prices are set somewhat above the anticipated sales price giving some room for negotiation. Further, it is not uncommon to see properties sell for above the listed prices in a hot market or where the seller had agreed to pay some buyer's loan costs, thus adjusted the selling price upward.
Now that you've done some homework and feel confident about what a particular property would sell for, it's time to find the diamond in the rough! Review active listings in the same neighborhood. Are there any real low ones? Do they have similar features as your target analysis?
Let's say you found a listing of a 1,400 square foot home with the same bedrooms and bathrooms listed at $110,000. Ask yourself "why is this one priced so low"?Your inspection reveals that the home needs substantial work which is reflected by the low asking price being in need of new interior paint and drywall repair, new flooring, new kitchen appliances, possibly a new roof and general clean up of the home and yard.
You have cost estimates from contractors that total $15,000. If you were to purchase the property at the listed price, (which you would probably offer less especially if it's been on the market for a while), your base cost at a glance would be $125,000. Hmmm, it's looking great for a potential "houses flipping" project!
Other Important Things To Consider When "Houses Flipping"
The above is just a nut shell version of what and how to analyze before purchasing a flip property. You need to also consider the following included, but not limited to marketing costs to sell your future flip (brokerage selling fees), estimates from an escrow/title company as to other associated selling fees, and loan fees if you are needing to finance the property.
Be aware that hard fixers are often the greatest flip properties. Consumers need to understand however, that these properties will not qualify for conventional bank financing. Many buyers are not aware that not only they, themselves need to qualify for financing, but the property must qualify as well.
These types of properties will need to be purchased either with cash (liquid cash on hand in your bank) or hard money, short term construction financing or private investor funding. These types of loans generally cost 5-10 points and range at 12 1/2 to 15 percent interest. It won't matter if you are a perfect A++ borrower. These hard money loans are made by a private or pool of investors that demand a minimum return on their investment (the money that they are lending) and are making the loan based on your project, not you so do not be offended!
Before you fall off your chair, Jennifer herself has taken many of these same loans to fund her own projects. She looks at it this way. If you can still make a lot of money even by paying these higher rates and fees and you do not have your own money or any other source of funding, what does it matter? The only other option would beno option so then, you have just lost out on a great "houses flipping" profit opportunity!
Another Word Of Advice…
Consult in advance with your mortgage broker or lender and let them know that you are considering purchasing a property to flip. Lending guidelines are always changing and there may be a waiting or holding period before the property could qualify for future financing. This is critical to know and plan for, assuming your flip will bring a buyer needing to finance the property.
Feel free to contact us for flip financing information or if you have questions or need further assistance. Happy "houses flipping" analyzing!
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