How to flip a house
The name of the huose flipping game is to buy low and sell high. The whole thing hinges on three things: the market, cash flow and upgrades.
The market
In real estate, the market is a great unknown. At different times house prices rise dramatically and quickly. What happens then tends to be that people sell their smaller houses, make a little money, and move into bigger houses hoping to make even more money. It doesn't always work like that. The market fluctuates and bubbles burst. Sometimes those people that have bought bigger houses can't really afford them, if the market reverses they will quickly find that they owe more than the house is worth. Too many people in this position and the house prices start to fall again.
Of course, this buy/sell--buy/sink cycle is not the only thing that drives the market. It is also dependent on the federal interest rate. This also fluctuates and when it is low people start buying again, at least in theory. If you want to get into the house flipping game, you should learn as much as you can possibly learn about the market in your area. Read books, surf the internet, and get some professional advice.
Cash flow
Flipping houses takes a lot of money. The loan that you got on the house that you live in is not the same as the loan you will get for the house you want to flip. It takes a lot more capital to buy a second home (or a third home). Mortgage companies will not loan the same percentage on second homes, as they will on first homes, so you will need to have more cash to put down as a payment.
Also, the tax laws are different for second homes. The taxes you pay when you sell your primary residence are much smaller than the taxes you must pay when you sell a second home. If you sell a second home, you have to pay capital gains tax on the home.
Finally, you will not only need cash for the purchase of the home. If you are going to flip it, you will need to make some improvements and renovations. Make sure that you have enough capital to purchase the house, improve it, and then sell it. If you don't have the capital, the flip will turn against you.
Renovations
If the market is moving in the right direction and you decide that you have enough money to flip a home, buy one for renovation. When making the updates on the home, do just enough improvement to increase the value. You will probably have to put in new carpets and paint the walls. Just about every time you buy a house, you need to do these things. If you are trying to flip the house, you will want to make other improvements as well.
When making renovations you should do all of the work yourself and stick with your strengths and things you know how to o. Focus on the yard. That is one place that you can really increase the value of the property without a lot of capital. What yard work usually requires is "sweat equity".
Other renovations that have a good return for the money are bathrooms and kitchens. Big renovations might include refinishing the cabinets in the kitchen or adding a Jacuzzi in the bathroom. However, little renovations can add quite a bit of value for a very small price. You can install new handles and doorknobs for almost cheap. Also massaging showerheads don't cost much but can mean a lot.
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Tags: flip flipping flipping_houses buy-low_sell_high market cash_flow renovations upgrades updates remodels landscape capital the_market housing_market
