OfflineWhen looking for potential houses to flip, it is important to take a look at why they are being sold in the first place. If one was to purchase a house that needed almost no work done, there would be no room for improvement. That house would not make a good profit. You need to find a property that will take some amount of time and effort to renovate. At that point, the house will attract more potential buyers and sell for a nice sum.
The house to look out for is purchased far below its true value because it is unattractive and in need of some renovation. By making a lot of small repairs and improvements, it will ideally be ready to go back on the market in a month's time. Only this time, it will look better on the inside and out and be snatched up quickly. If all goes as planned, you will have sold it before the first mortgage payment is even due.
When you ask those who renovate for a living, they will tell you that house flippers do little more than superficial work to the homes they buy. The risk is that the home the flipper purchases will need more work than the initial inspection foretold. In that case, the time and expense involves escalates quickly. This lowers the profit of the venture significantly.
If a home has been foreclosed upon, it is a prime target for flipping since it is frequently cheaper than a property being sold by an individual. Frequently, the price will be as much as forty or fifty percent below the local market value, in which case there is money to be made from even the smallest renovations.
Ideally, the money made from the first few houses funds the renovations of future flips. If the company is established, they can improve their turnaround time, saving money paid out in loans and interest.
Some quotes by
Peter Mason
For me this is the most fun of real estate investing. It will really help to get a good understanding of rehab. You want to get to a point that you can almost run the repair cost in your head.
A good place to start of course is Loews's or Home Depot. Get familiar with general pricing such as appliances and flooring. Keep a log of the cost to install and you can always reference it. After you have done a few you will have a pretty good idea.
It is important to secure a good handyman to do the work for you at a reasonable cost and to give get estimates from.I found mine in the paper after talking to 3. He has been with me for 6 years now.
Depending on whether you are flipping or holding this is an invaluable approach. If you re selling to a buyer they will want to know how much the repairs are going to be to make a decision on your property.
Randy Bailiff
Randy- Great point on learning prices of rehab. And NEVER believe the seller when you ask how much rehab it needs! You can often double or triple that amount....remember they have an agenda to lowball rehab amounts.
Another great tool to help learn what supplies and labor cost is Hammerpoint on Dean's SFL system. This is an awesome tool to use....even to play around with to understand for instance how much a 10x20 room of laminate will cost to lay. It's also helpful to print out and take with you as a checklist when you look at a property. Go down the list and jot down what it needs in each category. Take measurements. Go home and input your numbers and you have an estimate for your rehab. Really awesome tool for flipping or really any property purchase. If its an assignment deal, a buyer would love to see your detailed estimate. It lends credibility to you and your numbers big time. We have never looked at a property that didn't need at least some work. And like OP stated above, your good deals will need at least some rehab.
Sheila
"If God is for us, who can ever be against us?" Romans 8:31 NLT