Ralph R. Roberts - Flipping Houses For Dummies

Flipping Houses For Dummies, 2nd Edition

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Library of Congress Control Number: 2013954206

ISBN 978-1-118-80163-5 (pbk); ISBN 978-1-118-80159-8 (ebk); ISBN 978-1-80160-4 (ebk)

Manufactured in the United States of America

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Chapter 1

In This Chapter

Understanding the concept and challenges of flipping

Flipping the right way legally and ethically

Developing a winning strategy and the right connections

Surveying money matters and savvy renovations

Marketing and staging a house properly to maximize your profit

F lipping sounds easy. You can flip a pancake. You can flip a coin. Without too much effort, you can even flip out. Flipping a house, on the other hand, requires a level of knowledge, expertise, and sticktoitism unrivaled by any of these mindless tasks. It requires access to cash, and lots of it. It demands time, energy, vision, attention to detail, and the ability and desire to network with everyone from buyers and sellers to real estate professionals, contractors, and lenders.

In this chapter, I offer a broad overview of what flipping houses is all about. I introduce the overall strategy of flipping houses buy low, renovate, and sell a property at fair market value to earn a fair market profit. I reveal the difference between flipping the right way legally and ethically and flipping the wrong way ripping off buyers, sellers, and lenders for a quick wad of cash.

Throughout this chapter, I recommend a strategy that's worked for me during my over-30-year stint as a real estate professional and investor. I've built my approach on a strong foundation of honesty, integrity, dedication, and hard work, and I recommend that you do the same. With a positive mindset, a strong commitment, and the right approach, you stand a much better chance that your first flip won't flop.

In investment circles, the secret to success is clich buy low, sell high. This same principle applies to flipping houses. To succeed, you buy a house at 20 percent to 50 percent below market value, repair and renovate the property to make it a more attractive purchase, and then turn around and sell it at market value. That three-step process buy, fix, and sell certainly sounds easy enough, but each step carries with it a host of unique challenges, as I point out in the following sections.

To buy low, you have to be in a position to buy quickly. The trick is to have your financial ducks in a row before you go house hunting. Chapter reveals various ways to finance your flips.

Homeowners don't exactly line up around the block waiting to sell their homes for less than they're worth. As a house flipper, your job is to hunt for the homes in your area that are dontwanners, as in the owners don't want er. These orphan homes usually appear bedraggled. The yard looks like a weedy wasteland, the gutters are hanging off like a pair of old false eyelashes, the paint's peeling, and the interior is completely trashed. These properties are often referred to as distressed, and their appearance indicates that their owners are distressed, as well. Their dream home has become a nightmare.

When the homeowners need to shed the burden of home ownership, they may not have the time and resources to make repairs and renovations, place the home on the market, and wait for months or even a year for a buyer to make a reasonable offer. In such cases, they're often willing to sell at a greatly reduced price to a serious investor who has the financial resources to close the deal. How do you discover opportunities like this? In Part , I point out several techniques for scoping out distressed properties and their distressed owners.

The average house hunter wants a nice house. When you're flipping houses, you want the ugliest house on the block. To succeed in finding potentially profitable homes, you may need to change your perspective so you can see the beauty in a beast.

Flipping houses is a risky venture, but you can minimize risk and maximize profit by doing your homework:

• Research the property. If you're buying a property in foreclosure, probate, bankruptcy, or a similar situation, you need to research the property carefully to make sure you know what you're about to buy. Research includes a visit to the property and to the register of deeds office to research the title and other key documents. See Chapter for details.