Purchasing a house with the intention of quickly selling the home for a profit is the goal of any real estate investor. There are basic rules to flipping a house which include: buying a house below market value, rehabilitating the house, and then selling the house quickly at the maximum possible profit. When looking at potential properties it is important to calculate the time, effort, and renovation funds needed. Also, consider the cost of holding the property when you are renovating it, such as: taxes, utilities, and interest expense. Prior to making your final decision, you should calculate the capital gains tax on the estimated profit. Cosmetic updates are usually the easiest and least expensive improvements that can be made to a property. The following steps can be used as a general outline when flipping a house:
• Partner with Investors – Unless you have all your own funds, it is important that you have all you’re funding in place before you start looking for potential properties. Funding sources may include: friends, relatives, an equity loan on your current house, or a pre-approval from a bank or mortgage company for an investment loan. If you are financing the property, be prepared to put at least 15% down and have ample funds available to cover the cost of the repairs and materials.
• Build Your Team of Contractors – Unless you are a licensed contractor and intend to do all the work yourself to rehabilitate the home, you should have a trusted list of reliable contractors that will complete the work quickly and for a fair price.
• Finding the Right Property – Enlist the knowledge of professionals. It is imperative to find an experienced professional real estate agent that will keep you updated on potential properties that may be good candidates to be bought, rehabilitated, and then sold for a profit. When searching for the correct property to flip, focus on houses priced below market value that are in desirable locations. They should be in sound structural shape and in need of cosmetic updates and repairs.
• Make the Offer – Prior to making an offer on a house, make sure you have properly identified and priced out all of the major problems with the house. You should also have a list with the estimated costs to repair any glaring cosmetic repairs. Remember to focus on the cosmetic improvements that will bring the largest return.
• Oversee the Rehabilitation of the Property – The more work that you can do yourself, the more profit you will have when you sell the property. Contractors may get the job done quicker, but they will add additional expense from the work that they perform. The more work you do yourself, the more profit you will likely have when you sell the property. Time, cost of repairs, and effort should all be considered if you decide to hire contractors to perform some of the repair work. Remember to focus on the necessary and most important cosmetic repairs to ensure the maximum resale value of the property.
• Sell the property – Properly marketing the property is vital to maximizing your profits. The exterior of the house should have curb appeal and the interior should be modernized and clean. The kitchen and bathrooms should be updated and the bedrooms should be freshly painted. The overall appearance of the house should be clean, inviting, and well-maintained.
Just remember that time, effort, and cost are the most important aspects of flipping a house. If you are lacking in any of these areas, seek help. Professional real estate agents, contractors, experienced real estate investors may help you become more proficient in your real estate investment endeavor. Patience, skill, and experience are needed for continued success as a real estate investor.
Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com