House flipping – it’s the big trend in real estate. For those who are not risk-adverse and have a good eye for a home’s potential, house flipping can be a lucrative money-making venture. However, it isn’t for everyone, nor is it for every market. What is house flipping? House flipping involves buying a home, improving it, and then quickly selling it again, presumably for a profit. For example, say a house goes on the market that is a real eyesore. A house flipper buys it and makes some cosmetic changes before putting it back on the market at a much higher price. How do you make it work? Any old house won’t do for house flipping. Just because a house is in dilapidated condition and priced low does not necessarily mean that it is prime for flipping. There are certain factors that increase the potential for a successful “flip.”
• Location, location, location. The old adage of real estate holds true in house flipping, too. You can buy a house with the greatest potential at the cheapest price, but if its location is bad, it could be a recipe for disaster. For example, a house with train tracks running through the backyard is not going to sell no matter how nice you make it.
• Stick with cosmetic changes. If you have to gut a house, add rooms, blow out the kitchen, etc., it may be hard to get your money back, much less make a profit. Instead, focus on homes that require more cosmetic changes. Paint, flooring, updated appliances or fixtures – these are improvements that are relatively easy and don’t cost a fortune.
• Be a DIY expert. The more improvements that you do yourself, the more you stand to make. If you have to hire professionals, obviously that cuts into your profits. If you are experienced doing home remodeling projects yourself, you can save some money on repair costs. You can also improve your skills by studying DIY books and enrolling in classes at the local home improvement store – whatever it takes to become an expert at DIY projects.
• Get educated. Not only do you want to learn all that you can about home improvements, but you also need to become an expert on the neighborhoods in your community. That way when a house goes on the market that looks like a good candidate to be flipped, you know if it is a bargain in an up and coming neighborhood or one that you should avoid.
• Be wary. In a slow real estate market, house flipping can be extremely risky. If housing prices are dropping in your area, be sure to do a careful assessment of how much the house you are thinking of buying could depreciate. Also consider what you’ll do if the house ends up sitting on the market for longer than anticipated. There’s a lot of money to be made in house flipping. But, don’t make the mistake of thinking it is an easy gig to get-rich-quick. House flipping requires good instincts, lots of hard work, and a significant degree of risk. But, for the DIY junkie, it can also be an attractive way to make some money.
- Foreclosure listings are at a peak right now. Most foreclosures are in need of rehab work, but banks are pricing the homes well below market value. Even in this slow economy, first time homebuyers are abound and most are looking for homes that they can move in to. This makes a great opportunity for the savvy investor to come in and spruce up the foreclosures and put them back on the market for a profit.
