As seasoned house "flippers" who have "flipped" over 100 properties, we are often asked for practicle advice on how, and what, to "flip". What is "flipping", you ask? Investopedia defines "flipping" as "a type of real estate investment strategy in which an investor purchases properties with the goal of reselling them for a profit. Profit is generated either through the price appreciation that occurs as a result of a hot housing market and/or from renovations and capital improvements. Investors who employ these strategies face the risk of depreciation in bad housing markets". While your favorite HGTV show will show some of the ups and downs of flipping, here's some real-world tips from a couple that's been there. Like, for real.
1. Remember the 3 Golden Rules of Real Estate. You know the ones, "location, location, location". When looking for property, look for "ugly" houses (rundown or needing renovation and upgrades) in desirable neighborhoods. You can change the structure, or remodel the homes layout, but, ordinarily you cannot move a house. Look for houses within top rated school districts and in economically stable neighborhoods.
2. Buy at a Severe Discount. With a profitable goal at the end in mind, remember that you won't make any money if you pay too much for a house in the first place. When making offers on houses to flip you need to consider renovation and holding costs into the equation. If the math doesn't work, find another house. There's plenty out there.
3. Be on the Lookout for Murphy. Murphy's law states that, "Anything that can go wrong, will go wrong". You are never without risk when working on a flipping project, so you need to plan ahead for it; don't expect a complete problem-free project. It's amazing what one finds when they start tearing down walls and remodeling; what the local housing market may do while working on a project; the unexpected delays that pop up. The best way to protect yourself from Murphy (and his friends, cousins and distant relations)? See #2.
4. Finishes That Appeal to the Masses. When finishing a house, (that is, things like paint color and floor finishes), think with your end buyer in mind. Once your flip is complete, you'll want it to sell quickly, for the most profit, so be sure to use finishes that will appeal to the greates number of people in that market, and in that price range. Then watch the offers roll in.
5. You're Not Going to Live in This House. It's easy to become emotionally attached to a property, especially when you see the "before" and "after" and have put a lot of blood, sweat, and tears into a project. Always think with the end goal in mind, that a family (usually not yours) will be moving into the property, and your charge is get the project done for that would-be family.
Seeing a project through from beginning to end, improving a neighborhood, renovating a would be "dream home" for a family, and of course, profit, are some of the reasons people will "flip" a house. While not without risk, house flipping can be extremely rewarding and fun.
Melissa Rolland is a licensed Connecticut realtor. She lives in Tolland, along with her husband Todd, a licensed broker. Together they manage the Rolland Realty Group at Keller Williams Realty. You can connect with them at www.RollandRealtyGroup.com.