HOUSE FLIPPING: A BEGINNER'S GUIDE FOR SUCCESS

Flipping a house means buying a home with the intention of fixing it up and selling it within six months for a profit. Americans flipped 26,947 single-family homes in Q3 2014, accounting for 4 percent of all home sales in that period, according to real estate data firm Realtytrac. The average gross return for investors was $75,990 per home, up 2 percent from Q2.

Flipping houses can be profitable, particularly when home values are rising and interest rates remain at historically low levels. The Federal Housing Administration stopped enforcing anti-flipping regulations—which prohibited insuring any home for less than 90 days—in 2010. If you're looking to get into the home flipping business, follow these four guidelines for the best chance of success.

Build a Bankroll
Everything in life requires money, and house flipping is no exception. You could take out loans to buy properties, but then you are just creating debt in the hopes of making money. A smart house flipper who wants to profit immediately and often will use his or her own money.
The best way to build a bankroll is by saving over time. Consider selling your own home if the proceeds will pay off the mortgage and leave you with enough to get started. Those currently receiving regular payments from a structured settlement or annuity can consider selling their future payments to a company like J.G. Wentworth for a lump sum of cash now. Make sacrifices like selling off an extra vehicle, disconnecting cable television and giving up the $5 lattes in the morning to pad your bankroll further.

Buy at Discount
You'll make the most money if you buy a house for less than its actual value at the time of purchase. The best way to do this is by seeking out motivated sellers. These are people who need to sell quickly to relocate for a job or simply need to make fast money.
Use your social media networks to generate referrals. Inform friends and followers that you are looking to buy properties. Knocking on doors in prime neighborhoods can also generate leads—target homes with "for sale" signs and distressed properties that appear neglected.



Location, Location
The total value of all homes in the U.S. was $27.5 trillion at the end of 2014, according to data compiled by Zillow. That represents a 6.7 percent increase from 2013 and the third consecutive year of positive gains. But certain markets are doing even better.
Denver, Miami, Atlanta, Houston, Orlando and Las Vegas experienced the largest gains for 2014, with each up at least 11.5 percent on the year. These markets offer the largest margin for error for those flipping homes, particularly with a major housing market correction being predicted by several economists for 2015. This is mostly due to the Federal Reserve ceasing its quantitative easing program and no longer artificially inflating the markets.
A good rule of thumb when buying in areas that experienced low or negative year-over-year home value change (i.e., Indianapolis and Phoenix) is to only purchase homes at 10 percent or more below current market value.

DIY Where Possible
You'll likely need to hire plumbers, electricians and other contractors to tackle major home improvements. But the more you do yourself, the higher your profits will be. You and a few friends can install new sinks and countertops and even shingle a roof. Youtube has hundreds of instructional videos that cover everything from replacing water heaters to installing shower faucets. Creative landscaping can increase the value of a property by 13 percent, according to a study by Virginia Tech University. The DIY Network has several ideas for easy landscaping projects that anybody with a little ambition can complete.
House flipping is a cyclical endeavor that is only profitable when economic conditions are positive. Now is a great time to get started.

Comments

Post a Comment

Popular posts from this blog

Why Are So Many Trees Dying in Colorado?

Image
On a recent trip on I-70 to evaluate some land for a client, I was confronted with sad but beautiful image of red forests stretching for miles across the hills. The image of a red "evergreen" contrasting against the green scenery is mesmerizing at first until you take a closer look at red death destroying millions of trees in Colorado. Beetle epidemics across the western United States are becoming more obvious every season with entire landscapes turning red and brown as trees die. In northwest Colorado the beetle epidemics, triggered by extended drought in aging forests, are intensifying at an alarming rate, and there is little that can be done to stop them. Actions can be taken to protect high value areas such as ski areas, developed campgrounds and trees in people’s yards. Hastening Death: Pine beetles carry a fungus on their body and legs. Once they enter the tree, the fungus multiplies and spreads. This blue stain fungus blocks the transport of water up the tree’s trunk ...
Read more

Amazing home on a spectacular lot!

Image
 For Sale: 6071 S Franklin St. Centennial, CO 80121 $2.4M Once in a lifetime opportunity to purchase a special home on an amazing lot.  Most homes in this area are passed down from generation to generation and rarely come on the market!  A rare find with water-front property in Metro Denver.  Two acres with the Big Dry Creek running through your backyard.  Located less than 5 minutes to shopping, restaurants, and award winning Littleton Public schools. The home consists of 4 bedrooms and 3 bathrooms. 2200 Square feet above ground and 750 Square feet in the finished basement. Once you turn on Franklin St you feel like you are in the country.  One of the few lots in this special enclave of homes on acreage in the middle of the city.  Only a couple of blocks and you will be on the Highline Canal trail with access to 71 miles of continuous trails.  Franklin is a dead-end street at the Highline Canal which leads to a quiet street with mostly foot traf...
Read more

Vacation Property 1031 Exchange Guidelines

Great News! The IRS will not challenge whether a vacation property qualifies for Section 1031 treatment if certain specified ownership and use requirements are met. The IRS has released Revenue Procedure 2008-16, which provides definite guidelines for a safe harbor vacation property 1031 exchange. To meet the safe harbor requirements, a taxpayer, during the 24 months prior to the sale of his or her vacation home, or within 24 months after the purchase of their vacation property as a 1031 replacement property, must: 1) Rent the property at fair market rent for a minimum of 14 days during each 12- month period of the 24-month period. 2) Limit personal use of the property during each 12-month period of the 24-month period not to exceed the greater of 14 days or 10 percent of the number of days the property is rented at a fair market rent during each of the two 12-month periods. The IRS defined personal use to include: the taxpayer or any other person who has an interest in the vacation pr...
Read more

Homebuyers Gaining Bargaining Power as Inventory Increases

Home values saw their smallest monthly increase since May 2012, up just 0.2 percent in January from December according to the latest Zillow Real Estate Market Reports. Year-over-year, U.S. home values rose 6.3 percent in January, down from peak gains of 7.1 percent in August 2013. This slowdown is in part due to the rise in inventory of for-sale homes across the country. The number of homes listed for sale on Zillow was up 11.1 percent annually in January, the fifth straight month of rising year-over-year inventory. Homebuyers Gaining Bargaining Power as Inventor y Increases
Read more

Centennial - Heritage Greens January to March 2008 single family home sales report

4 residential closings up 400% over 2007. Absorption Rate is ok at 8.25 months. It not possible to determine any kind of trend since the first three months of 2007 only saw one sale. but it is very encouraging that the sales quadrupled during the same period in 08. Jan - March 2007 Jan - March 2008 % Change # of sales closed 1 4 400% # of sales Closed - YTD 1 4 400% Avg Days on Market 4 105 2625% # of Active Listings - 11 - Absorption Rate (months) - 8.25 - Average $ per SqFt 246 223 -9.34% Average Price (Sold) 960,000 745,683 -22.32% Click here for active homes for sale in Heritage Greens Absorption Rate Definition - the rate at which a market can absorb additional units of supply without causing market saturation and severe price distortions. For example, during a recessionary period, many homeowners may list their house for sale. Since the supply of homes entering the home resale market increased without a corresponding increase in demand, the market absorption rate has been exce...
Read more