Real Estate Investing Blog - DiscountedProperties.com

Does the idea of flipping houses sound exciting and lucrative? For many individuals, the thought of flipping a home and making a mammoth profit for only a few months’ worth of work sounds too tempting. The problem is that if you don’t know what you are doing, you could easily lose in the house flipping game.

Regardless of what late-night infomercials want you to believe, there is no secret to house flipping, and it takes great skill to flip a house to make a tremendous profit. Flipping real estate takes time, patience and a great deal of knowledge about the business.

The first step to successfully flipping houses is to understand how much time, energy and money is involved. Once you have a firm grasp of what is needed for flipping real estate, you will want to know what NOT to do when flipping houses.

The following lists details the top five things to avoid when flipping houses:

1. Do not purchase a property if you haven’t first researched the neighborhood. It is important to remember that all neighborhoods are not created equal. In other words, just because a nearby community has seen an increase in property values doesn’t mean that the community in question has as well. You must research the neighborhood’s property values and its real estate market and trends, just to name a few, before flipping real estate there.

2. Do not purchase a property without having a budget in mind. Your budget will revolve around the financing you receive to purchase the property. Because of the recent real estate bust and credit crunch, do not expect to secure financing without a healthy down payment. Remember: the bigger the down payment, the lower your interest rate will be.

3. If you are new to flipping real estate, avoid homes that need extensive, structural repairs, as this can often get you in quickly over your head. Leave the major rehabs to the seasoned real estate flippers and instead look for homes that require cosmetic makeovers.

4. Don’t get emotional when flipping houses. One of the biggest mistakes real estate investors can make is not separating their emotions from their flips. Remember: at the end of the day, flipping real estate is just business!

5. Don’t expect the process to always go smoothly. Having high expectation when flipping houses will not prepare you to handle problems, chaos and budget overages, which frequently happen when flipping real estate.

Flipping real estate can be a lucrative endeavor, but it takes excellent business acumen, hard work, and excellent financial management.

The mantra for rehabbing houses in today’s tough housing market may be “buy and hold.”  In other words, it may benefit you to buy a home at a good price and hold onto the property until the market shows signs of rebounding.

The bottom line is that there is money to be made rehabbing houses in today’s real estate market if you follow the rule of “buy low and sell high.”  With that said, home rehabbing, even in the glum housing market, is possible, and can even be quite lucrative, if you follow certain rules:

* Buy the “right” house at the “right” price. Understand that buying the “right” house at the “right”   price always involves conducting research and spending only what the market can bear to fix it up and get it back on the market. In other words, the amount of money you spent rehabbing houses has nothing to do with how you can realistically price the homes.  Focus on fixing up areas that have the highest cost-benefit ratio.

* Consider all of the costs of home rehabbing, including the buying, repairing, carrying, holding and selling costs. Forgetting to include one of these factors in your home rehabbing project could cost you dramatically, especially in today’s tough housing market.

* Find a realtor who specializes in foreclosures. The right realtor can be your key contact point when searching for rehabbing houses.

* Focus on one niche area. Make it your mission to become educated on one, particular area so that you can scout out the best property for your home rehabbing project. Researching a particular area can help you better understand the local real estate market, the average costs of homes in the area, and the real estate values and trends.  In home rehabbing, it always pays to be your area’s specialist.

* Look for the “easy” fixes. Many home rehabbing experts focus on the homes that need only cosmetic work, instead of the homes that need gutted and rebuilt, from the inside out. This may be the best first step when rehabbing houses in today’s shaky housing market, as it will eliminate the need to make a large investment into any one property.

* Keep your finances healthy. With financing options tight due to the current credit crisis, it is vital to maintain a sparkling credit score so that you can get the best financing possible for your home rehabbing projects. In other words, don’t lose your precious profit margin from rehabbing houses by paying more in interest fees and charges!

* It may make more sense to live in the home you are rehabbing, for many reasons. First, it will eliminate the time pressure to get the house sold in a pre-determined amount of time. Secondly, it will allow you to wait for the right moment to sell the house, instead of selling it while the market is still in a slump.  In addition, it will save you from all of the holding costs associated with rehabbing houses.  Lastly, should you live in the home rehabbing project for at least two years, then you can sell the home at a profit – and not have to pay capital gains taxes!

Savvy home rehabbing experts can make money in any market.  In a shaky real estate market, however, you simply need to ensure that you are making smart, practical, and cost-effective decisions in rehabbing houses for a profit.

While many of the houses on the market have the potential to be profitable investments, you’ll make much more money if you concentrate your efforts on finding a fixer upper for sale. There are a couple of good reasons for this: Most people in the market for a home would rather buy something that doesn’t need work – and properties that need work are often owned by people with a shortage of extra cash.

If you purchase a fixer upper for sale, you can pretty regularly make some quick and easy repairs to the property and turn it for a quick profit. It may seem hard to believe, but a quick coat of paint, new carpet, and a thorough cleaning can add thousands of dollars to the value of a fixer upper for sale.

Since most people are looking for a home that’s in move-in condition, there’s less demand for a fixer upper for sale. Less demand means that anyone willing to take the time to make a few repairs can turn a little effort into thousands of dollars in extra profit.

By concentrating your efforts on the fixer upper for sale real estate investing market, you can also avoid paying real estate commissions in many cases. The reason? There are so many homes for sale that are ready to be lived in that a lot of real estate brokers will insist that repairs be made before they’ll consider listing a property.

This leaves the door to greater profitability wide open for an investor to pick up a fixer upper for sale without having to pay real estate commissions – which means even more money you can put in your pocket.

Regardless of your experience level, you can generate a lot of cash in very little time – even in today’s troubled market – if you use your head when you flip real estate. That’s the easy part. The challenging aspect is knowing how to get property inexpensively enough that you can still turn a clear profit when you flip real estate.

By dealing only with highly motivated sellers with a clear need to sell quickly, you can negotiate terms that will allow you to buy low. You can then make any needed repairs on the property, mark up the price, and successfully flip real estate, while putting the profits into your pocket.

In order to flip real estate, you have to know what a property is actually worth, and a wild guess based upon outdated information isn’t good enough. Since the market is still declining in many parts of the country, getting recent comparables is critical. It’s also imperative that you remember that it’s possible for a property to lose value between the time you buy it and the time you re-sell it to someone else.

If you estimate that a property has an after repair value of $150,000, it’s always a good idea to factor in a buffer for human error as well as further depreciation. Targeting properties with owners willing to sell for roughly half of it’s value will protect your profit margin and increase the likelihood that you’ll generate fast cash when you flip real estate.

This can be challenging, but it’s not impossible. So have at it – and take charge of your future today.

The decision as to whether to form a corporation or LLC for flipping houses is one that you’ll have to make based upon sound advice given to you by a professional. The best people to help you make this decision are your lawyer or a CPA – preferably one that concentrates on real estate.

The factors that they’ll probably be most interested in discussing with you will be how many properties you intend to flip and how frequently you intend to do it. Your answer to that question will determine whether they’ll advise you that you’re better off having a corporation or LLC for flipping houses.

There are legal and tax advantages to both forms of ownership, but there can also be substantial drawbacks. For instance, an off the cuff decision about forming a corporation or LLC for flipping houses will determine whether the IRS classifies you as a dealer. If they do, you’ll face substantially higher taxes.

So should you form a corporation or LLC for flipping houses? That depends upon your goals. One thing is for sure. Sound advice about whether you should form a corporation or LLC for flipping houses can mean the difference between being an investor – and one that actually makes money.

I know it can be really tempting to want to buy fixer upper homes. In today’s market especially when it is a buyer’s market more people who have some investment capital are looking to get into real estate. Real estate can be a lucrative investment if you know what you are doing but it can also spell disaster for someone who is not prepared and informed.

In today’s real estate crisis there is an abundance of homes that are empty and even more that are for sale due to foreclosure. But, you have to be careful when buying these homes because if they are fixer upper homes, you may be biting off more than you can chew. Many foreclosures and homes that have been empty for awhile will need some repair in order to get it livable again.

The advantage of fixer upper homes is that you can typically get into the house at a steal. You will likely pay well below typical market price. But, there’s a catch to that. The first thing you should do before buying fixer upper homes is to research, research, research! You need to know what typical homes in the area are selling for in prime condition. Find comparable homes that are not fixer upper homes and research their selling price in the market. This will give you a good basis for comparison.

Then, you will need to do a thorough inspection of the home and list everything you intend to do to move it from fixer upper homes to prime real estate. In order to do this you will need one of two things:

1. A lot of experience in construction to be able to effectively estimate the cost of all repairs and improvements or…

2. A solid, reliable contractor who will be able to get you a firm quote on all the necessary repairs and improvements on the house.

Once you have the price it will cost for the repairs, add in a cushion for unexpected contingencies plus an estimate for the time the home will be vacant and not generating income. Calculating these costs along with the asking price of the home will give you a good indication of what your net investment is going to be in the fixer upper homes. Is that less than the going rate of comparable homes in the area? Perfect, go for it! Is it more? You might want to rethink this particular property…or renegotiate the selling price.

So, let’s say you go through with the purchase of the fixer upper homes. You now have the task of putting into practice your research on the repairs, maintenance and improvements for the home. Keep in mind that the faster and more efficiently you get this done, the faster you can begin seeing a return on your investment. You can do this by renting out the house or flipping it to sell it at a profit. Beware, though of construction delays and those hidden problems that weren’t accounted for in the original bid.

If you know what you’re doing and have researched the area well, fixer upper homes can be a great investment.

Just be careful and good luck!

Whether you are looking to renovate a home or looking to build a new home, it is necessary to get a contractor to assist in the planning and building stages. Before conducting a contractor search there are many questions that should be answered and steps that should be made before hiring anyone. These are important in finding the perfect contractor for your job to ensure you get a quality result and have a reliable contractor. Conducting a contractor search is not difficult but ensuring you have the right one will take a little effort.

The first step in conducting a contractor search is to get the word out that you need one. The first place to start is in your local telephone directory. Call a few places and ask for proposals. Next, look in your local newspaper or community paper. A contractor search can also be done on our site for local contractors. Also check with friends and family in case they have a referral which is a great way of finding a reliable contractor.

When conducting a contractor search, there are questions that should be asked. Ask how long the contractor has been in business and if the company was ever run under a different name. Ask if there are any lawsuits against the company. Find out who he subcontracts with and make sure they are paid in a timely manner and happy to work with the contractor. You should do a thorough contractor search and get at least three proposals but five would be better and check the references of all the contractors. Make sure the references listed are not related to the contractor in any way. The more references supplied the better.

There are requirements for being a contractor and you should ensure each candidate meets the necessary requirements. A license to work is usually needed. You should verify the contractor’s license with the state agency before hiring. Also check out their insurance policy for worker’s comp and liability. Verify their status with the Better Business Bureau and you should have a successful contractor search.

Real estate wholesaling is where you take a property you own and sell it to an investor for a profit in order for that particular buyer to sell it, also at a profit. Sound complicated? It’s not really, just think about wholesale retail which most of us are familiar with. You have a product. You sell it to a retailer at a small profit. The retailer then sells it to the consumer for an even greater markup. The same principal applies to real estate wholesaling. You have a property; you sell it to a buyer who in turn sells it at a greater markup. You get a profit; the buyer gets an even greater profit.

So, why not just cut out the middleman and sell it at a higher profit yourself? There are many reasons why real estate wholesaling can be beneficial.

The primary reason for real estate wholesaling is to get fast, easy money. You are selling at a bargain so some established investors may be very willing to snatch up the property to put the time and effort into it needed to flip the house. Perhaps you need the extra cash. Perhaps you just want to build up your reserves for additional investments. Regardless, you don’t have to worry about the details of fixing up the property, listing it, negotiating, selling and closing. You leave that to the buyer.

Maybe you are an investor and want to get out of the business. Perhaps you simply are a bit over extended and have a variety of houses. You can sell in bulk and get out from under multiple mortgages at one time. You are still making money but at a lower rate of return. If you are selling houses in bulk though, the sum of the profits will make real estate wholesaling lucrative for you. You can then decide what to do from there.

The convenience of real estate wholesaling is another reason some investors decide to go this route. You are not tied to a particular profit margin or expected return on investment. If you are making money at all, wonderful! You can keep a property or get rid of it as you want to without having to go through all the complicated details of selling directly to a consumer.

In order to make real estate wholesaling attractive to a buyer, you will have to ensure they will get the bulk of the profit from the final sale. So, you are definitely going to make less money. But you also will have more immediate funds and still make some profit from your initial purchase. Also, you will not have to deal with all the time and hassle of trying to fix up the house and sell it to the end buyer.

We’ve all heard about investing to flip real estate. But, what if you want to get into that? How do you start? Is it really as good as it seems? The answer to that is, it depends. For people who flip real estate it can be very lucrative. However, to flip real estate does not necessarily mean you will make a profit, either.

As with every other type of investment there are risks involved. There are ways to mitigate those risks and they primarily center around making sure you know what you are doing and are making sound financial decisions.

First, you need to remember that to flip real estate does not guarantee a profit. There are many factors that go into the decision and not all properties will be worth the investment. You need to be able to accurately determine when a property is worth investing in and when to walk away. Keep in mind before deciding to flip real estate the key considerations:

* Current market conditions nationwide
* Number of vacant houses available in the area
* Amount of time houses are staying vacant in the area
* Condition of the house
* Dollar amount it will take to repair or improve the home
* Amount of time it will take to repair or improve the home
* Asking price of the home or minimum amount to purchase it after negotiating the price
* Fair market value of comparable homes in the area that do not fixing up

Not everyone who decides to flip real estate gets into it to find fixer upper homes. Some people simply look around for good deals on houses in good condition, the buy cheaply and sell more expensively. Most of the time, the reason they can buy inexpensively is because of a foreclosure or because a seller is highly motivated to sell to get out from under the house. The seller may be willing to take just enough to make them whole or even may be willing to take a loss.

You should never get personally invested in the process to flip real estate or get emotionally attached to a home. Instead, think of it solely as a financial transaction designed to make you money. If you feel the deal isn’t going to make you money, though, it is time to walk away and look elsewhere. There are plenty of houses available and finding the perfect one is the key to turning a profit.

You need to be able to accurately assess the amount of money needed to get into the house and make it ready for sale. This will mean different things for each property you consider to flip real estate. Some homes may need minor cosmetic repairs and some will need more significant work. You will need to calculate the costs in both time and money to get the job done and how much you estimate being able to sell it for.

Anyone who wants to flip real estate and has never done it before should start small and get their feet wet before taking on more extreme projects. Once you gain experience, you can expand into more complicated investments. To flip real estate can be lucrative but there are risks involved. If you use your head, though, you can be very successful.