How Do I Flip A House?

The art of house flipping involves buying a house at a low cost and then selling it for a profit in a relatively short period of time

. Although it is a fairly straightforward process, house flipping becomes tricky when planned renovations go over budget or the house sits on the resale market for longer than planned, both of which eat into the seller's profits.

Finding a House to Flip: While foreclosures are dominating the current flip market, any type of house that can be purchased under market value can become a flip house. New construction in young communities or underdeveloped areas, estate sale homes, tax lien homes, and fixer-uppers all make good candidates for a flip home, in addition to impending foreclosures, REOs (real estate owned by the lender), and auction homes.

The neighborhood of the home you plan to flip should be taken into account before the purchase, including the market value and length or time on the market of other homes for sale in the area. If you plan to renovate the home before reselling it, consider the structural and cosmetic changes you will need to make: structural improvements are necessary but are higher dollar and offer less return on your investment, while cosmetic changes are generally require less capital and help a house sell faster.

You can also research the local real estate statistics for your county to get an idea of the housing supply, average price sold, median selling price, and average sold price compared to listing price.

Working within a Budget: Although it is possible to flip a house as is, most house flips require renovations, and fixer-uppers are the most common type of house purchased as a flip home. Always add 20 percent to your final budget as a measure of security, so you won't be under prepared and over budget when you discover that your flip home requires unplanned improvements or sits on the resale market longer than you anticipated.

Selling the Home: You want to sell your flip house for a nice profit, so you need to work within a budget that will allow the house to sell for considerably more than you invested in it. One of the best ways to save cash is to live in the home while you renovate and resell it, making most of the improvements yourself. Another money saver is to sell the home FSBO (for sale by owner) or sell to a house buying company as soon as the renovations are complete.

by: Brad Chandler

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