Real Estate Investing: Flipping Homes for a Profit
in Blowing Rock, Boone, Valle Crucis, Banner Elk, Seven Devils, Deep Gap or Ashe County.
With the financial markets falling out from below us and prices rising to all time highs, where can we turn to secure our financial futures? While many people struggle with the burden of how to keep up from month to month, a handful of smart investors have learned how to make sure that they continue to be able to pay the bills while the rest of the world falls apart. They have turned to the real estate market. The largest profit maker for the smart investor has become flipping homes.
The process of flipping homes is actually quite simple. The following is a brief overview of the basic steps to flipping a home:
STEP 1: FINDING THE DEAL
The most critical step to making money in real estate is finding the deals. The professional Realtors at Ace Realty are here to help with this step. If the home doesn't already have a profitable deal built into it, avoid it and move on to the next property! While upgrades can add value to a home, it can not make up for paying too much to begin with. When you go to look for homes to make a flip investment out of, spend time only on homes that are listed at least 20% below its "as-is" appraised value. If you see a home that is in a neighborhood of similar homes is listed at $285,000 and the other comparable homes are listed at $299,000, this home is not worth the time.
You can safely expect that the home is in perfect condition and that even with cosmetic and luxury upgrades, it will not sell for more enough of a markup to make a profit. On the other hand, if in that same neighborhood, there is a home listed at $234,900 you have something worth looking into. Now that you have found your deal, lets move on to the next step.
STEP 2: DEMOLITION
When taking on a flip project, it is expected that a major amount of demolition and reconstruction will be necessary. If you are going to get into this business, do not do it half way. If some part of the house is in need of a repair of replacement, tear it out and start from the base of it to avoid putting a gold plate over a rotted wall!
It is easier, faster, and less expensive to do the repairs the right way from the beginning than it is to go back at the closing table when the home inspector rejects the deal over something that could have been replaced four months ago. To improve the curb appeal of the property, also consider the landscape in the front and backyard when working the demolition.
STEP 3: REPLACE FIXTURES AND APPLIANCES
Replacing the fixture and appliances in the home will add exponential value to the house. Even if the home currently has working appliances that could "do for now," rip them out and replace them with brand new matching appliance packages. I nearly all cases, the upgrading of brand new appliances add in value more than double the cost of those same items. It is also necessary to be sure that a washer and dryer is included with the house. A completely updated house is not complete without a complete appliance package.
STEP 4: PAINT AND TRIM
Now that you have replaced the appliances and any structural problems within the home, your next step is to repaint the entire home. No matter how the current paint job looks, the entire place needs to be repainted. Be sure to pick a color scheme that matches the other colors throughout the house and that they make sense throughout the property. When painting the exterior, paint the trims a different color to highlight the added touches and make the home seem bigger from the outside.
Landscaping is also a part of the painting and trim step of the flip. You only get once chance that lasts a fraction of a second to make a first impression on a potential buyer. If the inside us the house is an absolute dream home for any given buyer, you will not even get them out of their car if the landscape does not look attractive. Plush green full lawns, colorful plants along the edges, perhaps a watermark, and a freshly paved driveway are all excellent deal openers for your home.
STEP 5: SELL FOR A PROFIT
After several weeks of hard work you are ready to finally make money for your efforts! This is the part of the project that you need to be focused on from the beginning of your investment. From the start of the project with making sure that there is enough room in the purchase price to make a profit.
You should have also been making sure that you planned a reasonable budget for repairs, upgrades, labor, and other fees. At this point, you also need to consider commission fees that the Realtor's charge when the home sells.
When you are trying to come up with the best selling price for your home, you should consider enlisting the advice of a experienced Realtor from Ace Realty that can do a intense walk-thru of your home and research comparable properties in the area.
If you list the house too low, you scare away some investors who would wonder why a good looking house is too cheap. If the price of the house is way above the comparable homes then you could turn away buyers because you are trying to make too much profit on the flip.
If the price is wrong, you could end up with a listing that would sit for many months without an offer, in the meanwhile, you are still paying carrying costs such as mortgage payments, utility bills, property taxes, etc. Trusting the experience of an experienced Realtor will make you the best profit possible for your home as quickly as possible.
OTHER TIPS FOR FLIPPERS
- For best values, buy homes that are in pre-foreclosure, sellers in desperate times would rather take a small loss then ruin their credit over losing their home.
- Make sure to have the home inspected to make sure you are aware of potential code violations you would need to address when rebuilding.
- Only put upgrades into a house that barely make it the best on the block, do not over do it!
If you have question about this article or about real estate in either in Blowing Rock, Boone, Valle Crucis, Banner Elk, Seven Devils, Deep Gap or Ashe County, please give one of our professional Realtors a call today.
Ace Realty in Blowing Rock can help you with all your Blowing Rock area real estate needs. We can be reached at (828) 295-6165.