HFG DIGITAL NEWSLETTER
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| HFG DIGITAL NEWSLETTER |
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Could you be a Flipper?The way real estate is bought and sold has changed considerably in the last few years, and the practice of “fixing and flipping” (buying a house, fixing it up, then selling it for a profit) is no exception. With the softer markets that nearly every area is experiencing to a certain degree, this sort of investment is not as profitable or easy as it once may have been. That doesn’t mean you should take the possibility off your list entirely. What it does mean is that you need to be extra careful if you want to try a fix and flip, and utilizing the experience and know how of your real estate agent is crucial. There are (and will be for some time) a number of foreclosures available that are mainly in need of cosmetic repair. These could make good properties for a fix and flip. Of course, they key is how far below market price can you purchase it, and what will the work cost you in terms of money and time. Another consideration is whether or not you have the skills (and time) to perform the necessary work yourself, or if you’ll be hiring professionals. If you’ll be doing the work yourself, discuss any inspection issues with your real estate agent and/or a professional home inspector. You also must secure the necessary permits with the local county or municipality or your work may not pass inspection when it comes time to try and sell the house. If you hire professionals, make sure they pull the proper permits as well. Some experts are advising that, in this market, flippers may want to try making very aggressive low offers that they wouldn’t have been able to make in other markets. Obviously there was a time when flippers couldn’t do this because of a hot market, but profit margins were much higher so it didn’t matter. Now that profit margins are lower, flippers can make up for that by not paying as much for their initial purchase. Establishing a budget has never been more important. When lenders easily handed out loans, financing seemed unlimited. Now that lenders are being more cautious, it helps to have plenty of cash on hand for a down payment and necessary home repairs. As a flipper, you’ll want to allocate your resources as carefully and efficiently as possible. If you’re wondering what you should be renovating in your investment, it is very similar to any other house that you’re selling (depending on whether or not there are any major structural issues with the house you’ve purchased). Updated kitchens and bathrooms often provide the highest return on your investment. New flooring and paint for both the interior and exterior are also sure winners. Finally, don’t forget the curb appeal. You want buyers to fall in love with the house the minute they drive up. Not surprisingly, cable television often portrays the process of fixing and flipping a property to be a lot easier than it is in real life. If it’s something you’re thinking about doing, consider all your options carefully, do your research, and discuss the costs and benefits with your real estate agent and mortgage professional.
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