The term flipping seems to be everywhere nowadays, including in the titles of a number of television shows that have attracted loyal followings. That means lots of people are interested in buying houses and reselling them at a profit. That's the good news. The bad news is that there's considerably more competition for fixer-upper homes than there was before the concept became so popular among television viewers.
But that doesn't mean there isn't still a significant amount of money to be made buying and reselling homes. Here are three tried-and-true ways to succeed at becoming a successful home flipper.
Fixing and Flipping Houses
The first one is the most popular, and the concept is quite simple (at least on the surface): you find a home that's in need of repair or upgrading, you go in and do whatever work is necessary, and then you put the home on the retail market. Depending upon where you live, how hot your market is, and how good of a bargain hunter you are, you can sometimes make $25,000 (or much more) on a single transaction.
There are some dangers involved in that strategy, of course, including paying too much for the property in the first place and then in underestimating how much the repairs or upgrades will cost. In fact, the latter situation provides one of the most common points of tension in the various television shows devoted to flipping houses, so it's best to have a solid knowledge of home prices and repair costs before you attempt any flipping method.
Fix, Hold, and Sell Later
A second method that works well is to buy a rundown house, do whatever it takes to bring the property up to standard, and then to rent the home on a lease-option basis. There are some advantages to this method. First, you can get a potential buyer into your home without having to pay a real estate fee. Second, you'll be getting a renter who genuinely wants to buy the home at the end of the lease, so they'll take better care of the property. Finally, there may be some tax advantages to you if it takes more than a year for the lease option period to expire. Check with your tax advisor for more details on that.
Flipping Houses
A third method requires a greater knowledge of home prices and repair/upgrade costs, but it can make you a considerable amount of money without having to do any repairs yourself. That method involves finding properties and reselling them to other investors on an as-is basis. You won't make as much money per transaction, since you'll have to sell at a below-market price to the next investor, but depending upon your market and how good you are at finding bargains, you can flip those properties faster, since you won't be doing any repairs or upgrades before you turn around and resell them.
Fixing and reselling homes has been an investment strategy for centuries, and will continue to be a popular investment option as long as folks still live in houses. You can get your piece of that pie if you shop hard, estimate carefully, and know your market!
Copyright ? 2006 Jeanette J. Fisher
To Make Money Investing
Real estate investors have made money by buying fixers, fixing them up, and then selling them for years. It's not a new real estate investing method. But what if you live in an area where homes sit on the market and sell at less than full price? Can you still make money investing in real estate by fixing houses under such market conditions? The simple answer is yes, if you do your research, find the right seller, and follow proven strategies.
Real Estate Market
It's been a sellers' market in America for a number of years, with more buyers than houses, which meant that sellers weren't as motivated as they were back in the 80s, when interest rates were sky high, inflation was running rampant, and mortgage lenders were more cautious. Today's market is shifting towards a buyer's market and real estate investors find home sellers more willing to bargain, because like in every age, people get into trouble for various reasons.
You must know what houses sell for, under what terms the property sells, the conditions of houses sold, and how long the average home sits on the market. Once you know your market, you will know how much to offer a motivated seller.
Find the Right Home Seller
You might think you're looking for a bargain house, but what you're really looking for is a motivated seller. Look for sellers that have found themselves in financial distress, for whatever reason, and who need to sell quickly. Sellers with difficult situations have motivation, and will be willing to work with you to overcome the difficulties they face. Those are the houses that will make you money, regardless of the overall market in that area.
If you look at houses on MLS, tell your agent to request that the seller be present. This way, you have the opportunity to talk to the home seller and see what problems prompted the home sale. You can also run ads that say "We Buy Houses."
Fix the House Right
To give yourself the edge when you go to sell your home, don't just paint everything white and have boring beige carpeting installed. Today's home buyers look for a home that makes them feel "at home." Learn how to profile your home buyer and make decorating choices to target that buyer. You don't need to spend extra money fixing up the house; just make wise design choices.
Sell Your House
Since most home buyers look for houses with real estate agents, don't waste your valuable time trying to sell on your own unless you have sold many houses and know exactly how to manage all the disclosures and paperwork. Find an agent who is willing to show the house, not just place a lock box and forget it. Every time the house is shown, it needs to be staged with lights on.
You can still make money investing in real estate in today's market. Do your homework, learn as much as you can and follow proven strategies.
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