Home Experts: Local News
How to Fix and Flip a House
Tools
Story Updated: Aug 22, 2011
The term "flip" a house essentially means to buy a house for a value price, make improvements and sell at a profit. Flipping became popular during the housing bubble, even sparking reality television shows teaching people how to flip. When the bubble burst in 2008, flipping houses became less lucrative, but you can still make money if you know what you are doing.
Understanding the Numbers
Purchase the right target investment property at a price that allows you to make an ultimate profit that is worth the effort. Accurately forecast what the value of the house will be after repairs. Know the immediate market area of the house. Find out what houses in that area actually sell for, not just the asking price of those properties. Try to determine if prices are trending upward.
Understand all of the costs you may incur. There are four categories of costs: buying, improving, carrying and selling. Costs to improve the property are difficult to forecast. Many projects go over budget. There needs to be enough of a cushion in the forecasted profit to account for possible overruns. In addition, you will not just spend money on improvements and repairs. Any real estate transaction comes with closing costs. Consider the expense of carrying the property, such as mortgage payments. Have a clear understanding of the total investment so that you know your absolute bottom-line price that you are willing to pay for the property.
Scoping Out Repairs
Plan and budget for repairing and improving the property, identifying a realistic scope. Learn which types of improvements offer the greatest return. According to "Money" magazine, landscaping almost always gives a 100 percent to 200 percent return on its value. Investing in the curb appeal of the home, such as adding mature trees, gives a great first impression to potential buyers who can make your flip successful. As you consider costly interior improvements, do research on the typical returns they yield. Sometimes quick-hit redesign work can generate an effective return. One example is to remove old wallpaper or wood paneling and replace it with new drywall with a fresh coat of paint. Another example is painting over too-vibrant or dated paint colors. Often, neutrals attract the greatest number of potential buyers.
Know your market. Don't try to reach too quickly for the high-end property market if you don't understand the needs and tastes of high-income buyers. You might make effective profits by turning lower-priced properties more quickly.
Analyze whether it is worth your time to repair and improve the home yourself or if it is better to hire experienced contractors. If you do work with contractors, develop trusted relationships over time. Make sure that you oversee the work, and get multiple estimates before signing any contracts.
Conclusion
Fixing and flipping homes can be an exciting and worthwhile investment strategy for those who take the time to understand the complexities involved.
Understanding the Numbers
Purchase the right target investment property at a price that allows you to make an ultimate profit that is worth the effort. Accurately forecast what the value of the house will be after repairs. Know the immediate market area of the house. Find out what houses in that area actually sell for, not just the asking price of those properties. Try to determine if prices are trending upward.
Understand all of the costs you may incur. There are four categories of costs: buying, improving, carrying and selling. Costs to improve the property are difficult to forecast. Many projects go over budget. There needs to be enough of a cushion in the forecasted profit to account for possible overruns. In addition, you will not just spend money on improvements and repairs. Any real estate transaction comes with closing costs. Consider the expense of carrying the property, such as mortgage payments. Have a clear understanding of the total investment so that you know your absolute bottom-line price that you are willing to pay for the property.
Scoping Out Repairs
Plan and budget for repairing and improving the property, identifying a realistic scope. Learn which types of improvements offer the greatest return. According to "Money" magazine, landscaping almost always gives a 100 percent to 200 percent return on its value. Investing in the curb appeal of the home, such as adding mature trees, gives a great first impression to potential buyers who can make your flip successful. As you consider costly interior improvements, do research on the typical returns they yield. Sometimes quick-hit redesign work can generate an effective return. One example is to remove old wallpaper or wood paneling and replace it with new drywall with a fresh coat of paint. Another example is painting over too-vibrant or dated paint colors. Often, neutrals attract the greatest number of potential buyers.
Know your market. Don't try to reach too quickly for the high-end property market if you don't understand the needs and tastes of high-income buyers. You might make effective profits by turning lower-priced properties more quickly.
Analyze whether it is worth your time to repair and improve the home yourself or if it is better to hire experienced contractors. If you do work with contractors, develop trusted relationships over time. Make sure that you oversee the work, and get multiple estimates before signing any contracts.
Conclusion
Fixing and flipping homes can be an exciting and worthwhile investment strategy for those who take the time to understand the complexities involved.