This question is for people who flip houses?

Question

Please tell me some constructive advice on how to flip a house? By this I mean tell me what are some pitfalls, what should I look out for, will a house with 1 bathroom sell for a profit, and so forth. I know there are books out there but I want to here from real people who are out there everyday.

Answer 1

Hi,

The number one pitfall right now, to me is that the market is slow and it is hard to re-sell the house as quickly as flippers need to do it.

If you are flipping a house to another investor (wholesaling) then you need to be picking up houses at 55% LTV or less or with majorly good terms.

If you are flipping for end users, you have to fix the house better than any other house in the neighborhood and then sell it at 85% of the value to get a fast sale. So when you are buying a house to flip, you have to work your numbers with that in mind.

When I am rehabbing a house with only one bath, I look to see if I can add another bath or at least a half bath. People want two bathrooms now. I live alone and I have two bathrooms. Adding a bath to a one bath house is one of the best things to do to add value to a house.

Best of luck to you,

Barbara
www.therealestatebirddog.com

Answer 2

Hi! I have been a Realtor for a long time. Withe Global Market crash last week and the over inflated costs of homes and interest free loans, flipping houses is very difficult. You have to major restorative (not just a paint job and new floors or carpets) to get any decent profit. Buyers are smart. They can tell all the new upgrades and go on line and see what the cost. One Seller tried to tell my buyers he paid over 15K for the new Bosch appliances in the granite tiled kitchen. We wrote down the serial numbers and he lied. He paid less thatn 5K. This upset the Buyers and he lost a sale because they loved the house, but no longer trusted him.
You also have to pay interest on your construction loans and that just went up over 1 whole point to 8% on Friday. THAT is a huge jump. If you have any delays in finishing the project, bad weather, or holidays, you are doomed. The house sits and you are paying for nothing. This really only works if you have 2-3 projects going in a line. As one finishes, the 2nd one is half done and the 3rd is started. Losing 3-4 mohts can greatly cut you profit and remember, not all houses are for all people. Your house will only attrach a percentage of the market of Buyers.
The other issue is picking colors (neutrals) and making sure everything is sparkling and brand new. This is very time consuming to re-sheet rock a wall or ceiling, add electrical outlets, new flooring and paint perfectly with no drips or pattern marks. Just that one room cost you lots of monies and sweat equity.
On the plus side, if you have a good team of painters, floor people, tile and kitchen guys and an electrician and plumber you can make some pretty decent monies if they can work together as a team and keep the clock going. This is the hardest part as ost people do this part time. But it can be done and I know several pairs of guys that flip 3-4 house a year and make close to 200K each!!! Now that is a nice amount of monies, but this is the USA in New Jersey. Now every where is like this. Hawaii would certainly be a plus or any area near the Ocean is prime. If you have any other questions, please ask. Marie

Answer 3

Oh, boy, I could write a book! My own experience tells me that this is NOT the time to do this. I purchased a 5 bedroom Colonial house and totally rehabed it - new 2- heat system, roof, siding, totally gutted it. That was a year ago. I am paying over $2,500 a month mortgage, ins. and taxes. My savings have taken a beating, I have sold stocks, etc. "They" say it is a buyers market....it's not! Every street here in eastern CT has 2 or more For Sale signs up. Nobody is buying! Do a tremendous lot of investigating - DEFINITELY have an inspection done before you buy,. then make a budget and figure on 15-20% more. We added a 1/2 bath and apparently that's not a selling point. I could go on but please have someone look at the house and get real advice - like you are apparently already doing because of asking on Q&A. Good luck!

Answer 4

Flipping houses is nowhere nearly as easy as the late night infomercials make it sound. To start with, you need a very thorough knowledge of the real estate market in the area in which you intend to perform this venture. You will need to understand what these properties might be worth on the market when you are completed with whatever work is required.

Additionally, have a substantial amount of cash at the ready, since you will only get a mortgage for a certain percentage of the property value (investment vs owner occupied), plus cash to pay for any needed improvements, as well as cash to service the mortgage liability until the property sells.

Answer 5

Constructive advise; this is not for the novice. You risk a great deal of investment money and may not make a profit. Especially in today's market. I had an attorney tell me just he other day, that he doesn't advise anyone to even attempt to get into flipping, it's just too risky.