During the housing boom, there were investors making a good living on buying a property, then quickly restoring the home and selling it for a nice profit. That tactic is not as prevalent today as it was then, but it’s still part of the portfolio for many investors. Flippers are all about the right opportunity. The chosen property has to be in a debilitating state and priced well below market value. Shrewd investors can find those type of properties anywhere. The business of flipping a house is not for the faint of heart. Having a plan, patience and plenty of cash is required. Adequate savings are a necessity while money is flying out the door for the kitchen remodel, plumbers and new landscaping.
Another reason that accessible cash is vital is that you’ll probably need to hold onto the property for at least three months because of the Federal Housing Administration and flipping regulations. Houses sold less than 90 days after they were purchased aren’t eligible for FHA mortgage insurance. Those sold between 91 and 180 days are ok, but require an additional independent appraisal to make sure the price is justified. What that means for you during that waiting period is additional carrying cost. Each day you own the property cost you money in interest, utilities, taxes and insurance. The majority of homes for flipping purposes are bought with all cash. If you take out a mortgage, be sure to discuss with the lender about potential pre-payment penalties.
Every community has homes that meet the criteria of properties worth flipping. Consult with a local realtor to assist in the evaluation phase of locating homes that can be fixed up and sold for a profit. Buying a home in well-kept neighborhoods where one or two homes stick out like a sore thumb presents the best opportunity to buy and sell for a gain. A home that meet the guidelines of flipping should be purchased for at least 25% below fair market value and require no more than 10% of the purchase price toward repairs. A $150,000 home should not require more than $15,000 in total repairs. Using the 25/10 rule would assure an investor of being able to sell the home for a profit. Many beginners hurriedly jump on the first property without properly analyzing the market or the repairs needed and end up losing money. A plan and patience will mean happy returns for buying and flipping a home in todays real estate. Please visit my website www.JohnnyBrooksHomes.com for helpful tips on buying or selling a home.