Flipping HOUSES?? Good Investment?

Question

For those who don't know, the term "Flipping Houses" is when you purchase a house, fix it up and sell it for more money to make a significant amount of profit. Does anyone know if this is a good road to take? A high risk? A low risk? Have you had experience? Tips and Knowledge? What can you tell me about it? I would like to know because I'm really thinking about doing this.

Answer 1

I have been investing in real estate for over 20 years. I agree that you need to understand your target market before jumping into flipping. There are other less risky alternatives then risking your money in flipping projects.

Flipping is ideal if you have the talent, time, money and the wherewithall to conquer the obstacles. Everything costs more than you budget, depending on the condition of the property you need to plan and anticipate the unknown defects that are going to pop up. Does every property present problems? Not exactly but the ability to avoid problem properties comes with experience.

If you are lacking any of the above then you need to compensate with the other. If you have the money, then you can buy the talent, time and experience. If you don't have the money, then you have to have the time and talent to deal with the project.

If you insist on flipping, I would suggest the government auctions through HUD, VA and the FHA for example. By the time they get to auction they have been inspected and you generally get a good picture of the scope of work that needs to be done. I have yet to come across a HUD property that I have bought that had any surprises with it and thus you jump in with your eyes wide open.

You will definitely want to work with a good real estate agent who can get a quick property value for the area you are working in. I am not familiar with the California market but you want to stay in the middle as far as property values go and look for the worse house in the best neighborhoods that is going to appeal to the largest consumer market in the area when completed. For example, in Louisiana there are not that many million dollar homes. The average home is around $200,000 to $250,000. You would want to concentrate in that area or just below it since there are going to be more buyers in those markets. The middle ground will also present the largest profit margin. Million dollar homes require top dollar renovations. In a bottom market you may not recoup your investment. The middle market you can get by with a middle dollar renovation and recoup 100-150% or more of the cost. You have to factor in the cost of holding the property while it is being renovated otherwise you will find yourself without any equity if you are not careful. Figure mortgage payments, taxes, insurance, etc. etc.

Flipping can be a great business. I suggest you watch the many cable shows that deal with those types of deals. If you haven't already, look for "Flip this house" on A & E or "Property Ladder" on TLC Discovery. Property ladder is more amateurs doing the flipping. FTH profiles professionals.

Answer 2

Sam B seems to know what he's talking about and so does the GIRLWHOKNOWS. If you don't have any connections to vendors who can do inexpensive and quick work and can't do it yourself it probably will be an uphill battle. You need to know where to buy wholesale for materials, Home Depot isn't going to get your in the red. I'd suggest possibly finding a buyer before a property and there by eliminating a large amount of the risk. I do this for a living so it's obviously possible but I see A LOT and I do mean A LOT of people that have no clue what they are doing and think this is a get rick quick with little work scenario and that is very far from the truth. You have to know your market, know a good deal about construction & rehab, know how not to get taken by contractors. . . it's a lot and it's not for the faint at heart. If you're in the midwest I'd be glad to help you.

Answer 3

real estate is always a good investment. if you are planning on flipping houses make sure you have the ability to pay the mortgage on it until it sells. also remember that you may need to fix it up a bit. If I were you I would get started by making sure you understand real estate, loans, taxes, and titles. find your self a good realtor that you can trust. find a mortgage broker you can trust. remember that none of these people are gonna work for free. so dont try to nickle and dime them to death. In some states you can get around having to use a realtor....but I prefer to use one so that I can use my free time making money instead of trying to sell a house.
Pay attention to the market that you are buying in. are homes selling fast? are they going for the kind of money you will need? remember that a buyer if financing will only be able to get a loan for a certain percentage of the estimated value. what have the houses been selling for in that neighborhood? thats a good way to get an idea for what you can sell for, as long as the house is in similar condition. Its a good idea with little risk, but it is expensive if you dont play your cards right. oh yeah, dont go out and waist all your profits, invest it into your next property.
Honestly, you might consider keeping some of the homes as rentals (with the market doing what it is doing now), if you can earn a positive income on them. I sold a house in 2002, made about 200k. 3 years later and i would have made about 600k on the same house. Know your market area. hope that helps.

Answer 4

Good investment, high risk now. The bubble is losing air. It use to be a sellers market now it is turning to a buyers market.

Check your area and see how long the houses have been listed for sale.

In a sellers market they go for over the asking price and can be sold before the for sale sign goes up. This is what happened to numerous neighbors of mine in the last 24 months.

In overvalued areas FL & CA houses can stay on the market for 14+ months and the offers are below the asking price. Do your homework first.

Answer 5

It really depends on your local real estate market, and how cheap you are able to get the house, and how much work it will take to get it ready. If the market favors the seller, and the house was purchased for below market value, and the repairs are pretty cheap (painting the ugly walls, etc), then it's a good deal. It can be pretty risky, b/c if no one wants your house, then you are stuck with it. Make sure you buy properties that are rentable, if you wind up stuck with the property, at least you can rent it. Make sure that the potential property is evaluated for expensive problems, before you buy it.
Hope this helps!

Answer 6

It's risky. You have to know your market, be able to plan and execute the remodel on time and on budget, pick the right house in the right area, and then know how to get the word out that this house you've worked so hard on is up for sale. You also need to know when people are buying and what they're looking for in your asking price range, because if you miscalculate, you'll get screwed. Plus, you have to know how to deal with contractors, what permits will be needed and how to get them, and what the local laws and regulations are.

Answer 7

If you can do all of the work yourself, can evaluate the house and truly know what needs to be done, then it can be very rewarding, as long as you're in a good housing market (not like Michigan, where I am). If you have to pay someone to do all of the work, your sunk costs will be difficult to recover. If the work is mostly cosmetic, painting, landscaping, cleaning - easy to go, if you've got to rip out electrical or plumbing, that can get pricey quick.

Answer 8

Very high risk. Lot's of hidden expenses. Including taxes for a home you have not lived in for at least 2 years.
You'll learn after your first 'flip'.

Answer 9

Well, in Buffalo, out of town flippers have been fined and jailed because, let's face it, most do not make the repairs they need to. I would stay away from this investment idea as you just can't be sure how hard the local housing authority will be.

Answer 10

I flip homes, but without rehabing them first. They way you're doing it will be more risky than just flipping because of holding cost. If your area is in a slump, look into flipping short sales or pre-foreclosures.

Regards