House Flipping For New Investors
There is a new trend in real estate investing and it’s called “house flipping.” What this means is an investor buys a piece of property, does some renovation to it, and then sells it for more than the original purchase price pocketing the profit. This seems easy enough, and it is. All it takes is a good team and some know-how to make money flipping houses.
Some Simple Rules
There are some simple things to keep in mind when fixing-and-flipping real estate. Your primary goal is to earn a high return on your investment, so you’ll want to do your research before purchasing a home to renovate and sell. Keep in mind that you are looking for that perfect combination of inexpensive purchase price and quick and affordable renovations that will allow you to sell the property for more money than you put into it. One way to do this is use a 70-percent formula that is common in house flipping.
When researching property, you’ll want to obtain an estimated selling price of the home after the renovation is complete alongside how much the renovation will cost. For example, imagine you have found a home that is a bit downtrodden and selling for $100,000. A contractor can get the home in tip-top shape for $40,000, and a real estate agent says she can sell it for $200,000, easy. If you take your selling price, $200,000 and multiply by 70 percent, you have $140,000. When you subtract the $40,000 for the construction work, you have $100,000. This is a good investment. If the homeowner wants more than the 70 percent less construction fees, you need to find another piece of property.
You noted that in the hypothetical scenario you were consulting with a real estate agent and contractor, and there is good reason why. When fixing-and-flipping homes, you need to have a team of knowledgeable people skilled in this type of real estate investing. This includes financers if you do not have the upfront cash yourself to purchase real estate, insurers, contractors, and a real estate agent ready to secure your profit when all is said and done.
House flipping is a form of real estate investing that many find profitable and rewarding. After all, what could be better than relieving a homeowner of the burden of a home he or she can no longer afford and turning it into someone else’s dream house? It’s a win-win situation for all involved provided you stick to the rules and surround yourself with a reliable team.