Question from Stan: I see many houses for sale and many of them need fixing up. How do you know which house will make a profit? I want to start flipping houses right away.
Answer from Jeanette Joy Fisher
In haste to make up for what they view as lost money-making opportunities, many beginning real estate investors jump into the flipping houses business without proper preparation. Some get lucky and make a profit on their first flip. However, with the recent market shifts, it would be better for you to really get a firm grip on the reality of fixing and flipping houses before you make a costly mistake.
How do you know which house will make a profit?
- You must know what the house will sell for once you fix it up.
- You must know how much repairs and upgrades will cost.
- You must know how to get the best financing for your situation.
- You must know how to do the work or know who you will hire to make repairs. You also will want to make changes that your future buyers desire.
- You must have a plan of action so you can begin making repairs immediately. A house that sits after closing costs money daily for the mortgage and utilities.
- You must know how to sell the house to a qualified buyer.
The best way to determine which house will make money is to make a spread sheet of many houses. Go to your local home improvement store and get prices for all the materials needed. Compare the house purchase price, materials, labor, and expected sales price. Add in your holding costs, closing costs, and unexpected costs fund. Determine which houses offer the best profit and make many offers.
When you first start out in your flipping houses business, you'll want to look for houses needing only cosmetic work. Look for houses that just need cleaning up, painting, and new flooring. Use your imagination when viewing these homes. Try to visualize the finished house as you look at structural features and the surrounding homes.
Fixing and flipping houses can be much more than a way to make money. You can also help improve neighborhoods. Besides, turning a dumpy fixer into a buyer's dream home is fun!
For more information about how to fix and flip houses, join our free real estate investing teleseminar.
Copyright © 2006 Jeanette J. Fisher