Flipping Houses For Dummies. Roberts Ralph R.
inside for a closer look.
Focusing on kitchens and bathrooms
Depending on their condition, kitchens and bathrooms sell houses or sink deals. A spacious kitchen with plenty of counter space and all the essential amenities – a clean range, refrigerator, microwave oven, and dishwasher – creates an impression that the kitchen is a great place to prepare meals and hang out with friends and family members. A sparkling-clean, well-lit bathroom with plenty of storage space creates a sense of comfort and cleanliness that permeates the house.
Making moderate changes
Somewhere between painting a room and building a room addition are moderate changes that you can make to a house to improve its value and draw more buyers. These improvements include installing replacement windows, replacing the screen doors or entry doors, and refinishing wood floors or installing tile or vinyl flooring. Chapter 18 lays out your options.
Tackling structural enhancements
Some houses are begging for a few major overhauls. Maybe the house has an unfinished attic that’s perfect for an additional bedroom or a beautifully landscaped backyard that has no easy access and no deck or patio. In some cases, you may discover a dinky house surrounded by mansions. By raising the roof and building a second story, you can double the living space and boost the house into a higher bracket. Chapter 19 takes on some of these major renovations, which may inspire your own creative visions.
Although this book focuses on the buy-fix-sell approach to flipping houses, you can profit from a flip in numerous ways, including the following:
❯❯ Sell the property.
❯❯ Sell to an investor who’s better equipped and more motivated to flip the property (you’re essentially earning a finder’s fee, also known as the bird-dog fee).
❯❯ Refinance to cash out the equity in the property, usually to help finance repairs and renovations or to use the money for other investment properties.
❯❯ Sell the property on a lease option, essentially collecting rent with the hope that your tenants will eventually purchase the property.
❯❯ Lease the property – become a landlord!
❯❯ Sell the property on a contract, acting as a bank and collecting the interest.
See Chapter 20 for details on the various approaches to profit from a flip. In Chapters 21 and 22, I explain how to market and sell your home for top dollar. And in Chapter 23, I explain certain tax considerations that may help you keep more of your profit by paying less of it to your rich Uncle Sam.
Chapter 2
Do You Have What It Takes to Flip?
IN THIS CHAPTER
❯❯ Squeezing a house flip into your already hectic schedule
❯❯ Taking inventory of your financial readiness
❯❯ Checking your gut for the daring and determination to succeed
❯❯ Putting together the tools you need
Anyone can do it.
If I had a nickel for every time I heard someone say that about flipping houses, I could retire on my own private island in the Pacific. When a real estate investment guru says, “Anyone can do it,” what she really means is, “Anyone like me can do it.”
I prefer presenting house flipping in a more realistic light by saying, “Anyone who has sufficient desire, energy, and sticktoitism can do it.” By following the advice in this book, you can acquire the necessary knowledge, gather investment capital, and find plenty of properties to flip, but if you don’t have sufficient gusto and grit, your flips will most assuredly flop.
This chapter leads you on a journey of self-examination to determine whether you have the right stuff to flip real estate – time, energy, a strong financial position (with your own or other people’s money – OPM), organizational expertise, people skills, tenacity, decisiveness, imagination, endurance, a healthy sense of humor, and a good support system.
Most casual house flippers are weekend warriors. They hold down a day job of 40 or so hours a week and then work nights, weekends, holidays, and vacations on flipping houses. They typically invest anywhere from 20 to 40 hours a week, depending on how dilapidated the houses are, how ambitious they are to turn a profit, and how much of the work they want or need to do themselves.
Full-time flippers, who have enough cash on hand to finance their flips and cover their living expenses, typically invest 40 to 80 hours a week.
Although you may be able to delegate most of the work that goes into flipping a house, several tasks demand your uninterrupted time and focus:
❯❯ House hunting
❯❯ Networking to develop relationships that expand opportunities and flip houses in less time and for less money
❯❯ Negotiating and closing the deal
❯❯ Securing financing for purchases and renovations
❯❯ Budgeting and other accounting tasks
❯❯ Planning, executing, and supervising rehab projects
❯❯ Marketing and selling the property
In the following sections, I explain the advantages and disadvantages of part-time flipping, tell you when you can safely start flipping full time, and list the tasks that you should (and shouldn’t) delegate to save time.
For the time-strapped: Part-time flipping
When you’re just starting out, consider keeping your day job and moonlighting as a house flipper until you establish yourself. Your day job provides steady income and security, which enables you to qualify for traditional financing at lower interest rates. Your paycheck helps you cover the mortgage payments, finance renovations, pay quarterly income-tax payments, and stay afloat when the housing market cools. Your full-time job also (hopefully) provides you with health and dental insurance, retirement planning, and other benefits you don’t get from flipping houses.