Making money off of old houses, on the face of it, seems straightforward. Buy an old house at a bargain, pump in some money, sell it at market value, and profit. At least that’s what all those home flipping reality shows tell everyone.
But is flipping homes that easy or do reality TV shows and veteran real estate agents make it look easy?
You’ll get the inside scoop on everything about flipping old homes. Grab a cup of coffee because you’re about to venture into a journey that could make your wildest dreams come true.
Here, you’ll find out how you can make money off of old homes by flipping them.
Balancing the Risk and Reward
Flipping homes old homes comes with its own fair share of risks. When done right, the rewards of flipping houses far outweigh the rewards. The risk involved in real estate investment is like any other you’d expect in volatile markets.
Inexperienced traders in the stock market often go burst after making the wrong call on future stock prices. Speculators in the cryptocurrency market had a stern lesson on the risks involved in investing.
If you make the wrong call about the real worth of the distressed home you intend to flip, chances are that you’ll barely cover your expenses.
If you do get your numbers right and buy a property priced well below its potential appraisal, odds are you’ll sell the property triple or even quadruple of what you invested. Http://breia.com/how-to-get-started-flipping-houses/ offers some excellent tips on appraising old homes as well as where to get people with the right knowledge and experience in home appraisals. .
Therein lies the first and most important step of flipping an old home. Always make sure the reward far outweighs the risk. Investing money in a house that will bring in at least 50% of what you put in is cutting it close. If there is a market downturn there’s a distinct possibility of making a loss. If you can get the owner of the old home to sell it below the appraised value, almost always you’ll get a handsome profit, even in rough economic periods.
Just because a house is selling for dirt cheap, it doesn’t mean you should buy it. One of the cardinal sins that new investors make is buying homes in undesirable neighborhoods. After they burn through their savings account fixing up the home, they wonder why no agent books their home for a showing.
Don’t be that investor. Irrespective of the price you get for the home, make sure it’s located in a desirable neighborhood. Buy old homes in locations where there’s:
- Security and safety
- Few homes on sale
- Low crime rates
- All necessary amenities
There are many resources you can use to spot desirable neighborhoods such as Crime Report, Spot Crime, and the National Sex Offender Public website. Also, search for high grossing properties to pinpoint lucrative neighborhoods. You’ll also want to talk with a few residents of the neighborhood to get a sense of where the area is heading economically.
What Are The Renovations Needed?
People who’ve worked on renovation projects will tell you there they often uncover nasty surprises. A simple repair on the basement’s drywalls might reveal a much larger problem with a home’s plumbing or foundation. That’s why eyeballing the distressed property never tells the amount of repairs needed or what it’s going to cost.
Call in a professional renovator or better yet, get in touch with professional home appraiser. They’ll determine the amount of work you’ll need to put in the house and how much it’s going to cost. With that information, you’ll never buy a lemon.
Get Your Finances in Order
Flipping houses require a lot of investment, and you don’t want to take out loans for all the repairs. Also, you’ll want to put up the entire down payment for the distressed property, which is typically 25%. Having cash and putting up the entire down payment means you don’t have to seek out loans or use your credit card for improvements and renovations. When you finally sell the house, there will be a nice chunk of change left since you’ll not have any liability.
To successfully flip houses, you’ll need a solid savings plan. The savings will help you raise the down payment as well as service all the repair and renovation bills. Also, you’ll want to improve your credit score. A great credit score comes in handy when you need a quick loan to service some of the work on the distressed property. If you have lousy credit, lenders will charge high premiums which in they’ll take a large chuck off of your profits.
Getting the Renovations Done
You’ve identified a distressed property in a great neighborhood, secured the finances, and now you’re looking to get it renovated. Problem is, you don’t have the foggiest idea on replacing floorboards. That’s when you should hire a contractor. Even if you have some DIY skills, you should always call in professional help to renovate a distressed property.
Typically, a contractor adds to your budget, but they are worth their weight in gold when you get great property. The contractor takes care of everything from supply of materials to the site, acquisition of necessary building permits, and even subcontracting some of the work. That saves you a lot of time you can use to network with real estate agents and buyers. It also saves you from costly renovation mistakes that often make people go well over their budgets and timeframe. Avoid costly renovation disasters by hiring a professional contractor.
Following these few guidelines should get you started on the right foot in the business of flipping homes. After your second or third successful fix and flip project, you’ll have learned tons making you one of the few successful home flippers in the market.