Real Estate Investing Blog - DiscountedProperties.com

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.