Buying A House And Flipping It?
Rіɡht now I аm іn college studying tο bе аn architect. I wanted tο ɡеt a job fοr thе next summer working іn construction. Sο I figured flipping houses wουƖԁ bе ɡοοԁ bесаυѕе I wουƖԁ ɡеt exposed tο everything. I ԁο nοt know anything аbουt buying houses аnԁ аnу hеƖр уου сουƖԁ give wουƖԁ bе ɡrеаt. WουƖԁ I bе аbουt tο bυу a house οn credit аnԁ thеn fix іt аnԁ sell іt аnԁ repay thе loan back? Anything Ɩіkе thіѕ wουƖԁ hеƖр. AƖѕο getting money tο mаkе repairs... I hаνе heard οf construction loans bυt wουƖԁ I bе аbƖе tο ɡеt one rіɡht аftеr buying a home? If уου hаνе аnу knowledge іn real estate οr flipping homes уουr advice wουƖԁ bе ɡrеаt thanks.
It’s tough to flip a home. You would be better off just buying one, fixing it up and selling it. Most people don’t want a home that is upside down, and most cities, counties, and states have construction codes that would prevent you from flipping a home, or living in a home that had been flipped.
with no bank account and no credit (I assume, because you’re a student), flipping is much harder than they make it look on tv.
I bought a fixer-upper by “wrapping” the mortgage that was already on it. When you wrap an existing mortgage, you simply agree on a contract with the seller to take over the payments. It’s easy and CAN require no money down (if the seller agrees), but there are several drawbacks: 1) The bank that holds the note could realize what’s happening and call in the note because they dont have a papertrail on you, the buyer. 2) If you dont flip the house, you’re stuck with the payments. 3) You still dont have any money for fixing the place up.
Soooooo…the best house for this is one that is simply run down, requiring a minimum of cash and a maximum of labor. That way, you do the labor, charge the expenses, flip the property, pay off the charges and walk away, hopefully with some cash.
I had a little in the bank, and the house I bought was mostly just run down, so I did ok. Made about $30,000 having “owned” it for about two months. Labor…I worked my butt off about 10-12 hours a day for a solid month doing everything from interior trim and restretching carpet, to painting inside and out, tearing out a broken down deck and building a replacement, landscaping front and back. Nearly a week of repairing every little thing inside (including a new dishwasher and a really expensive housecall by the heatpump guy), another week of hardcore cleaning.
Not exactly the six-figure profits you see on Flip this House, but I wasnt hurt by the experience. I’d do it again, but houses that this will work on are harder to find than you might imagine.
Those days of flipping real estate are over, well at least to the un-experienced. You just missed the big wave of opportunity- I would advice you to sit on the sidelines and just go get a job. My advice is not to buy anything unless you are a seasoned professional.
Flipping to me has two meanings. The one everyone here seems to be talking about, is getting a property under contract (hopefully at a good discount), settling it so that you take title, making repairs/rehabbing it, and then marketing it to sell and hopefully selling at a high enough price to cover your investment and reap a profit.
The main meaning i think of for flipping, is putting a property under contract (hopefully with a long enough settlment deadline) at a deep discount, marketing to rehabbers, and then assigning your contract to them for a tidy profit. The rehabber/end buyer settles with the original seller and you collect the difference between purchase contract price and assignment contract price.
In that case, you only need enough money to put gas in your car, maybe reward someone for a good lead, advertising, possibly some title/abstract fees (to research background), and a few other smaller items. You keep your name out of public record, do NOT need to negotiate with banks for financing on your behalf, and do NOT need to do any significant rehabbing (maybe some “prehabbing” like cleanup, drywall, other minor prep repairs, if you want). You stand to make less than the rehabber, but you have FAR LESS at risk and potentially can have “flipped” several houses in the time it takes for your first “buyer” to complete a rehab, and have made more profit on the sum of those flips than any one rehabber has made.
The market continues to slump; it doesn’t make much sense flipping houses. Please becareful not to end up with a 400K mortgage going back to school. Buyers are hard to find these days (excepts some area in the U.S.).http://money.cnn.com/2006/08/24/news/eco…http://money.cnn.com/2006/08/23/news/eco…
okay well if the market is hot then yes you can make money but you have to get in early and flip them quick for a higher price than you paid. but if you dont know much about this then you may not want to get into it. alot of time invested and money invested and invested in the right way are all things you need to know before you even think about it. like how much of every dollar put into a kitchen gives you back. and if your in a college with a real estate department you may want to take a class or buy a textbook about real estate to help you.
You need construction and remodeling experience first. Not trying to sound condescending here, but there are some specific skills you need to develop to be successful in this.
The basics are easy — buy a fixer-upper dirt cheap, fix it up, sell it for a nice profit. And yes, you can still make money if you have to borrow money to do it.
Now comes the tricky part. The dirt-cheap properties that have profit potential? They won’t last long. You need to be able to walk into a house and determine what will be required to fix it up, how long it will take, what the repairs will cost, how much you can do yourself and what needs to be contracted, and do a mechanical inspection with the power, water, and gas turned off. Then you need to decide what the property will be worth once it’s fixed up and whether or not you can make a profit.
You have to make a decision on the spot. If you hesitate, someone else will buy it out from under you. That’s just the way it works.
In all honesty, from what you’ve said you should get a job as a construction site gofer. Cleaning up, carrying stuff, and most importantly, watching the construction process.
If you just want to get exposed to the different aspects of construction, flipping a house with no money, no experience and no contacts can be a very expensive way to do it. You’re much better off getting a job.
The self proclaimed gurus out there make the process seem so easy… but it seldom is. For example:
For flipping to pay off, you need to get a house at least at 20% discount vs. market value. How are you going to do that with no marketing, no letters to prospects (out of towners, owners facing foreclosure, etc.).
If you must get money from a bank or a hard money lender, you won’t get more than 70% of the after repair value of the property. Where are you going to get money for down payment, closing costs, repairs, etc.?
Even if you find a house, put it under contract and assign the contract to somebody else, how can you guarantee that your buyer is actually going to close? If he doesn’t, you have to be ready to buy it yourself or lose your deposit.
If you flip the house that way, what you are really doing is selling a house you don’t yet own. If your seller suddenly decides not to sell, you may be accussed of fraud. Do you know how to put the proper disclosures in place so that that doesn’t happen?
If the repair takes more than two months (believe me, it will) do you have the time to take care of supervising it once your classes begin?
Lots of things to think about…. I would just go get a job at construction, and if you really want to learn real estate flipping and rehabbing start by reading books about it. There is a good site that I recommend: johntreed.com, by John Reed; he is an anti-guru who just tells it like it is, unlike the hype meisters and snake oil salesmen that pose as real estate gurus. You will also find good articles in keybi.com or creonline.com.
Good luck,
Mario
http://www.goodneighborbuyshouses.com