OfflineHave you ever seen a property transform in your neighborhood by the hands of a real estate rehabber? In my neighborhood a real estate investor purchased a home last year with serious deferred maintenance. In as short as five weeks, he turned the doghouse in my neighborhood into a little gem and it quickly sold for a premium. All of my neighbors were in absolute amazement at the transformation of the house.
We make rehab loans to real estate investors so that they are able to do such projects. I love to see the ‘before’ and ‘after’ photos of these properties. But aren't you curious as to why real estate investors like these can earn premiums on these properties? Here are some important reasons why:
1. A Genuine Knack for Finding Niche Neighborhoods: Real estate rehabbers have a talent for finding properties in the most sought after neighborhoods where property listings last days or weeks at most. These are the opportunities for the highest price premiums.
2. Home Staging: Adding furniture, art, and other elements of style are what home staging is all about. Check out a recent blog post we wrote about using home staging to sell a home fast and for a price premium:
3. Giving a Contemporary Feel to a Property
4. Patience
If you’re considering selling a house this year and want to get a price premium, study up on some of the tools of the trade used by successful real estate investors and read the entire post on this topic here:
What other tactics and tools have you seen by real estate investors to get a price premium? Please share with us here. ccurwick
The TV shows make it look so easy. You buy an ugly house, fix it up in a week or two and then sell it for a whopping $100,000 profit.
But as anyone who has ever tried it knows, house flipping is a lot harder than it looks.
The math never lies. And often, the math doesn't add up to a sizable payday when you factor in the time, effort, labor and money to execute a flip. But that doesn't keep people from trying.
Investors flipped 156,862 single-family homes in 2013. The number of flips was up 16 percent from 2012 and 114 percent from 2011. The average gross profit for a completed flip -- or more accurately, the difference between the first sales price and the second sales price -- was $58,081.
Only 21 percent of those flips were foreclosure properties, down from 32 percent in 2011.
Investors have not lost interest in purchasing and flipping homes. In fact, now that we are seeing home price appreciation, they are more interested than ever. The challenge for many would-be flippers in our markets is a shortage of available inventory to flip.
Flippers face four key challenges:
-- Finding a good house at a low enough price to make the deal work
-- Finding reliable contractors to do quality work at a reasonable price
-- Finding money to finance the deal
-- Selling the home at a price that will cover expenses and provide enough profit to compensate for the time invested.
Once again, do the math! And we mean all the math.
For example, if you calculate a potential flip this way: Buy a house for $100,000, spend $20,000 on improvements, sell it for $150,000 and earn $30,000 profit, you clearly haven't done all the math that's needed.
What about the cost of borrowed money and the cost of selling the house? What if the contractor discovers, once he starts the work, that half the plumbing lines are rotted? What about the cost of insurance, utilities and property taxes while you own the house?
You must dig below the surface-level figures to paint a complete and accurate picture of the flipping opportunity. Only then can you determine whether it's a sound financial move for you.