Simple Tips For Flipping Real Estate
by: Heather Seitz
you've been living under a rock for the past few years, you've probably either
dabbled in real estate yourself, or at the very least, know someone who has. So,
how does someone that's brand new to real estate start flipping homes? (And let's
clear the air right now
IT IS NOT TOO LATE to start investing in real estate).
Follow these 7 tips to start investing in real estate today:
Look In Your Own Backyard
The grass is always greener in the other neighborhood,
and it's easy to keep looking for the "right" area. The bottom line
is that any area is the "right" area. In order to be effective in the
steps 2 through 7, you've got to get over the idea that real estate deals only
exist in other areas. It sounds cliché, but there are plenty of deals in
your own backyard. Not to mention, it's easier to manage and you're likely to
know the values in and around your area.
2. Find the "Right"
Not every piece of real estate is a good investment - even if
you can "steal" it! Make sure you look at things like:
Location - Will you be able to sell the property once you've renovated it?
- How much work- and what kind of work - needs to be done and is it a project
that you can afford to take on financially and from a management perspective?
motivation - Is the seller truly motivated enough to negotiate on price?
Have A Thorough Inspection
Unless you've been flipping real estate for
a while or have a background in construction, then it's a good idea to have a
full home inspection. It may cost you a few hundred dollars, but will catch things
that maybe you didn't know to look for. When flipping real estate, it's the "little"
things that add up very quickly and can eat up your profits!
Bonus Tip*** Use a home inspection to help renegotiate the purchase price
OR ask for a credit toward repairs.
4. Don't Get Emotional
Estate is emotional by nature. Investing in real estate cannot involve your emotions.
It's got to be all business. If the numbers don't work, move on to the next. So
many times, people are so desperate to flip their first deal that they make bad
decisions just to do something at all. Then, they've become so attached to the
deal that they try to sell it for higher than the market will bear and end up
holding the property longer, reducing their profit and getting left with a bad
taste in their mouth.
5. Know Your Numbers - All of Them!
night infomercials will hype you up with pipe dreams of flipping real estate for
millions of dollars in profits and no work. You've seen the testimonials that
go something like: "Mary Smith purchased this property for $100,000. It cost
$10,000 in repairs. She flipped the property for $140,000 and made $30,000".
Somewhere on the screen, you see in teeny tiny print: Results Not Typical. Your
Results May Vary!
Of course results are not typical because
those results assume that you buy the property for all cash and pay no closing
fees and have no monthly costs. Be VERY cautious of deals that you see that sound
In the real world, costs associated with flipping
real estate are:
mortgage fees, attorneys fees, regular closings fees, title, survey, etc.
It's more than just the repairs! When you're flipping real estate, you're likely
paying higher interest rates than on, let's say, a primary residence or second
home. In addition to the repairs, you've got to consider monthly payments, taxes,
insurance, utilities, etc.
Again, you've got closing costs and possibly real estate commissions to consider.
you're flipping a real estate deal here and there or you're looking to make real
estate your new career, it's important that you know - and figure - your costs
into your calculations. Keeping this in mind will help you keep from getting emotional
(See Tip 4)
6. Keep Track Of Your Progress
improve what you can't measure! Throughout the entire project, you'll want to
constantly track your progress. This way, you'll know, at any given time, where
you stand on the deal. This will help keep you focused by keeping the bottom line
in front of you all the time.
7. Expect the Unexpected
virtually every single property you flip, you will run across SOMETHING that you
simply didn't expect. Whether it's an issue that pops up 2 hours before closing
that needs to be handled or a big surprise when you peek behind the drywall that
you had to replace! You'll almost always run at least a little over budget or
hold it a little longer than you anticipated. But at the end of the day, you'll
have the satisfaction of taken an ugly house and turned it around and depositing
a healthy check in your bank account.