The lure of real estate investing is hard to resist. It can provide large profits in a short amount of time. However, as with all investment strategies where a large profit can be made, there is an equal risk of losing your shirt if you are not careful. House flipping is a term that is in popular use. It is so popular that television shows are produced to showcase it. Here are ways to keep your cash flow in the positive when picking a home to flip.
Choose Homes That Are Easy to Sell
A 100 year-old farmhouse may be a dream to restore to its former glory, but are home buyers looking for that type of home where you are flipping houses? Buy real estate that is selling in your area. You lose money when it is hard to sell a house you are trying to flip.
A home that only takes a few improvements to make it marketable sounds great, but only if you can actually sell it fast. You have to differentiate between renovating homes for personal use and renovating homes to sell to interested buyers. Flipping homes that your buyers want is your goal rather than renovating copies of your ideal home.
Infrastructure Is Everything
You cannot just add a coat of paint, some new tile flooring and a new front door to a home that is falling apart from the foundation up to make it flip quickly. If you try that, you will get a bad reputation quickly. Keeping positive cash flow in the house-flipping business means finding homes that already have a sound foundation and structure to work with.
Homes with old electrical service entrances and old wiring often require stripping the interior down to the framing to rebuild a solid structure to work with. Very old wiring often comes with terracotta sewer lines and plumbing in sore need of upgrades too. You need to weigh the pros and cons of each infrastructure problem before buying a home you want to flip.
If a home has not had its HVAC system upgraded for more than 20 years, it is time for a change. EnergyStar.gov recommends earlier replacements of heating and cooling equipment. New homeowners want to do small things such as add window treatments and maybe change the paint color in a room. They do not want to have to upgrade the furnace, air-conditioning and the hot water heater when they buy a home.
Some homes you may buy to flip may need all three of these systems upgraded before renovations begin. If the house is a solid buy with only the HVAC system and hot water heater being a deal breaker for a buyer, you probably can at least break even on those upgrades to make the deal work. Just make sure you hire HELP Plumbing, Heating, Cooling, and Electric or another reputable HVAC installation company and plumber in your particular area to upgrade the systems. Then, make sure you promote the fact that the furnace, AC and hot water heater are all brand new.
It takes experience to be able to pick out the homes for sale that are easy to flip. You want to avoid extensive renovations as much as possible. Look for things such as three-pronged outlets in all the rooms, thick insulation in attics, 200 Amp breaker panels, preserved hardwood floors underneath wall-to-wall carpeting, newer roof surfaces and recently upgraded kitchens and bathrooms. Also, carefully consider the home buyers in your market area. If they are really picky, you will need to spend more money to flip homes. Just keep in mind that every dollar you spend is not guaranteed of being returned at a profit.