Is flipping houses a smart way to make money?

Question

also what are the basics that you need to know to excell in flipping houses thanks

Answer 1

For some reason people seem to think you cant flip in a slow or down market. I completely disagree. It is all about purchase price, fix up cost, and resale price. It doesnt matter if the market is increasing or not. The way you make money on a flip is not with the market increasing, but with the value you add to it. Yes the days of buying a dirty home, and slapping some paint, and maybe a little cleaning with bleach and make 30k is gone. If you want to be a true flipper, you can still make great money. See, you buy a house that needs flooring, kitchen, baths, roof heat etc. Then when you fix these items, you are adding the value, not the market. When your finished you sell for a profit. Yes the sale time can take longer, but it will sell. If you are paying heafty carrying costs, this will cut into your profits so becareful. Treat this like any other business and watch your numbers. Always be conservative on the resale price, never let an agent tell an unrealistic resale value, just to get the sale now. Always do your homework. I will give you an example of my last deal in this "down market" where flipping is impossible. LOL
Purchase price = 240,000
Remodel cost = Roughly 33,000
Carrying cost = None (I paid cash, if you can great)
Sale time = 3.5 months.
Sale price = 344,000
Profit = 71k.
I do this several times a year, who ever says it cant be done has no clue what they are doing. Its all about buying low,low,low!!!!!! Never be afraid to insult the seller with your offer. You may get some bad reactions, and even piss off the realtor, but in the end when one says ok to your offer, you will have a good deal on your hands. Remember, always stay in budget!!

Answer 2

Flipping is an excellent way to make money, but it, just like any other way, does have risks. In a great market, the risks are minimal because you can hold the house for long term gain if necesary. In todays market, the risks are much higher because there are less sales and prices are getting lower. You could get stuck with a house you did not want to hold.
To avoid these problems, you need to find a home that is much lower than comparable sales, and then price your home for sale less than the current market value.

Answer 3

As indicated, you've got a LOT to learn before you make this leap. However, here's the basic formula that's served thousands of rehab investors well. Never, never, never (did I mention, never?) pay more than 70% of Full Market Value (as determined by comps, not list prices) MINUS any needed repairs to reach your Maximum Allowable Offer (MAO).

Got it?

FMV X .70 - repairs = MAO

And you never want to pay MAO if possible. Learn to negotiate. Especially if you're not doing the work yourself!
Learn it, know it, live it. If you stray from this formula, you're going to a seminar...at the school of HARD KNOCKS!

There's a ton of books/cd's/dvd's out there from every real estate "GURU" on the planet. Ron LeGrand's stuff is a very good intro into the business but for a free forum FULL of good information join The Creative Investor forums at www.thecreativeinvestor.com

Please keep in mind that HGTV makes it look easy. And what they skip over is the most important part....You don't make money in Real Estate when you sell, you make it when you buy!

HTH

Addition: I looked back at this post and realized it sounded sort of negative. That was not my intention. If you're serious about doing this, get yourself educated on the subject and go for it. If I'd listened to all the naysayers I'd never have even gotten started.

Another addition: The post below this one is excellent and I agree completely. You'll also notice that his numbers follow the formula that I laid out pretty closely. He paid a little more but he could afford to since he had no holding costs and he's obviously experienced enough to avoid huge costs overruns because his repair estimates are accurate.

Answer 4

You need 20% cash downpayment plus 7k for closing costs. You cannot borrow more than 80% of the asking price. Renovations are paid by you the owner. Also you must pay the mortgage, taxes and insurance. Be prepared to not find a buyer for 6 to 12 months. You need a large bankroll behind you With all the foreclosures on the market this is not the time to be flipping. Even the pros have stopped. If you guys are that handy you should start your own renovation company. Put your skills to work for you.

Answer 5

You can make a lot of money flipping houses. If you see value in the property and can buy under market value. Always try and make your money going into the property.

Is there a zoning change that can be made to add value to the property. Can you aggregate several parcels to create value for an end user?

Answer 6

It can be a good way, if you know what you're doing. However, the housing market in the US is not very good right now, so unless you're in one of the areas that isn't in a slump, you might not want to get started flipping houses until the market picks up a bit.

Answer 7

It can make you a lot of money, but you can also loose a lot of money, you have to research the market. Choose wisely about the location of the home, the price and stick to your budget. Plan high, because there's a lot of things to go wrong. Don't over do the house for the type of neighborhood it's in. You need to talk to a Realtor or someone with lots of experience. It's not just about fixing a house and selling it for profit.

Answer 8

You still can flip a house but it is much harder compared to a few years ago. Invest In Abandoned or Condemned Homes. You can get them for pennies on the dollar and therefore greater profit potential.

Charlie

Answer 9

Not in this current market. The best attributes you can have are the talent of financial negotiation (securing loans or mortgages, hope fully w/no $ down or $ back @ closing!), handyman skills, for cheap labor to improve home quality and of course good marketing/real estate skills to advertise, show and close the sale on the house.

Answer 10

If the location is good, and you can do allot of the work yourself then yes is still a possibility, but if the location is bad and you have to hire others to do the work then your chances of making a profit are less desirable