Many real estate investors enjoy "flipping houses," or buying
and selling houses quickly for profit. Not all flips are
fixers; however rehabbers make millions turning ugly houses
into dollhouses. On the other hand, some inexperienced
investors lose money buying houses that just don't turn a
profit.
If you're looking to get started investing in real estate by
fixing and flipping houses, you'll want to know what type of
property to buy.
Three Tips to Help You Find the Perfect Fixer
1. Understand Your Market
Your first task, exploring your market, helps you know a deal
when you spot it. Look at houses for sale in your area. Keep
track of sales and how long the houses take to sell. Ask the
selling real estate agent about the terms of these sales
because this helps you understand how sellers market their
property (some of this information is public record). For
instance, if a seller paid closing costs for the buyer, did
the price rise from the listed price accordingly? Or, did the
seller come down on the price and also pay the buyer's costs?
Examine the sales that sell quickly. What home features and
financing options prompted the fast sale?
Also, look at model homes. Buyers often buy resale homes
because they can't wait for a new home to be finished. But
these buyers like the special features new homes offer. Visit
model homes and take notes on how details like a water
fountain or a new state-of-the-art appliance makes a house
sell itself. When you remodel your fixer, you'll know what
turns buyers on and you'll make smart makeover choices.
2. Know When "Ugly" Means "Profit"
When you first start out in your real estate "flipping
fixers" business, you'll want to look for houses needing only
cosmetic work. Look for houses that just need cleaning up,
painting, and new flooring. Use your imagination when viewing
these homes. Try to visualize the finished dollhouse as you
look at structural features and the surrounding homes. We
like to buy the ugliest house in a decent neighborhood.
Don't be afraid of stinky houses that show horribly; look for
fixers with peeling paint, holes in the wall, stained
carpeting, and trash in the yard. Remember, these houses
won't look good to most buyers, but other investors see them
as gold mines.
3. Know When "Ugly" Means "Pass"
When you're new to real estate investing, always remember
your limitations. Use caution when considering houses that
need structural repairs. Some rehabbers replace walls,
plumbing, structural beams, sub-flooring, and electrical
systems, but they acquired those skills after years of
experience or they have the money to pay a professional.
If you find a house with structural problems, get estimates
from reliable contractors to do the work. If the walls have
too many cracks and bumps, you may need to hang new sheet
rock or hire a professional plaster refinisher. Look for
signs of plumbing problems such as water stains under sinks
and loose flooring, and get estimates for professional
repair. Take professional estimates into account before
deciding whether or not to purchase an investment property.
Any big expense decreases your eventual profit.
Turn Yucks into Bucks
Why would anyone want to do this hard work? How much does the
average investor make? In Philadelphia, real estate investors
buy houses expecting a profit of about $30,000. In Southern
California, many investors make $50,000 to $100,000 on each
house.
When you find a garbage-filled, flea-infested house in a
family neighborhood, take your bug spray, hold your nose, and
get ready to make a difference, in the neighborhood and in
your bank account.
You can make a fortune fixing nasty houses. Learn your
market. Know when "ugly" means profit in your pocket, and
when to keep looking for the house with the hidden gold mine.
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