Flipping Houses Part 1

Flipping Houses Part 1

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This is Part One of a series on Flipping Houses.  Please come back for the rest of the blogs in this series.

Investing in real estate can be one of the most exciting and rewarding adventures.  Typically when people think about investing in real estate, they think about one of two things.  The first one is buying a property and then turning it into an investment property that they intend to hold on to and then rent for income or at the very least to cover the costs of the property.  The second is what is generally called “flipping”.  In today’s blog we will discuss the second type of investing practice of purchasing a house, fixing it up and then selling it for a profit.

“Flipping” can be a risky undertaking, but potentially very profitable one as well.  There are some basic things that you will want to think about before you determine if you even want to consider flipping a house.  As with any property purchase, this will require quite a bit of money up front.  You will also need to be prepared to carry the property longer than you thought if the fixes take longer than you anticipated and/or if the property doesn’t sell as quickly as you had hoped.  Will you be doing the renovations yourself or will you be hiring someone else?  Is this your only focus or do you have another job that you will focusing on at the same time?  Do you have the ability financially and emotionally to hold on to the property longer than you had anticipated?  If you are prepared to handle all of those possibilities, then you are prepared to move on to learning more about “Flipping”.

In any investment your money is made in the purchase.  What that means to me is that if you don’t buy your investment at a price that allows you to make money at the end, it was a bad investment.  They key to a profitable flip comes in 4 basic phases.

Phase 1:  The purchase.  Just like purchasing your own home, there is a lot that you need to know.  You need to understand the area that you are buying a property in.  Are people buying and selling in that area?  Is there something about that area that appeals to buyers or are there areas that you want to steer clear of?  My best suggestion to you would be to consult with a professional Realtor who specializes in that area so that you can be educated on the properties and the local market.  KNOW YOUR MARKET.  Is it a buyers or sellers market, how long are properties sitting on the market before they sale, what does the distressed market look like?  All these are questions that a good Realtor can answer for you.  Look at the comparable sales and make sure that you have enough profitability built into your budget.  KNOW YOUR NUMBERS!  In a flip, if you don’t have a plan you are planning on failing.  You will also want to secure your financing (if applicable) so that you are ready to go when you find that great deal.  In planning your budget and securing your financing, be sure to have the money you need to get it all done.  It has been suggested that you secure several thousand dollars more than the price of the house to complete the renovations with.  Once you have determined where you want to buy, your tentative budget, and have your financing in place, it’s time to start looking at houses.

What kind of house are you looking for, you may ask?  Well, it’s definitely NOT a move in ready house.  You are looking for a house that you can substantially approve without spending too much by way of time and money.  Remember, this is not YOUR home, this is a house that you are buying, fixing up and selling as quickly as possible.  This is strictly a business transaction, so don’t make it personal.  You may also want to focus on distressed properties.  Those would be properties where the sellers are in a hurry to sell either because of a divorce, to avoid a foreclosure, bankruptcy, a death, bank owned properties, etc.  Lastly, we have found that houses in middle to upper middle range of what is selling in the area that you have decided to purchase in.  These are the best properties to flip because they typically appeal to the families who can really afford to buy a house and you have already determined in your research that the properties in this area and at this price point are moving.  These houses are typically 3 or more bedrooms with 2 or more bathrooms.

Come back for the next blog in this series of Flipping Houses.

As always, the best advice I can give is to get a great Realtor on your team to help educate you in all areas of your flip.  If my team and I can be of assistance to you, please don’t hesitate to contact us at 480-415-1341 or Katie@YourRedDoorTeamAZ.com.

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Phone: 480-415-1341
Dated: March 8th 2017
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