FLIPPING is the name given to the act of making quick profit by buying a property, then selling it straight away for more, often between exchange and completion, avoiding stumping up any more than a five per cent deposit.
Flipping word alone may cause anybody concerned in the real-estate market to quail. What had once been one of the key boons to the industry, and one of our best allies, has changed into a term that many wish to disassociate from, at least in the general public view.
Folks have come to the conclusion, through media coverage and dialogues about why the industry is in the shape that it’s in, that flipping homes and those that flipped were a massive reason for the tough business environment we are facing today.
While this is biased assessment, one can’t alter public perception with a straightforward wave of the hand. Yet flipping is still alive, though not brazenly publicized, as it was before. Look to any quantity of short sales and then follow the home possession of those houses a few months down the line. Folks are still flipping and making profits flipping homes, and as new folks dive into the practice, there are some pointers you can share with them to help them maximise their profits (and drive some business your way).
Many folks buy short sale or bank owned houses, invest some cash on mixing it up, then selling it to ‘find that what they make on the deal wasn’t exactly what they planned. In a number of cases more regularly than need be- these people basically finish up losing money. The explanation isn’t in price they sell the house for, but in the price they paid for it.
When planning on flipping a home, take into account how much you intend to invest in repairs or transforming and how much the market will enable you to sell the home in its remodeled condition. Then, work out how much you need to earn for the flip and then ensure you don’t pay too much for the house up front because this is where the money is truly made.
You might be convenient, you could be presented at electric or plumbing, but you are not going to be as quickly as a pro contractor. To earn cash flipping, you want to turn over the home as fast as practical. Besides, any electric or plumbing work should be done by authorized pros, and your inspection will see shoddy or wrong work that doesn’t measure up to code and you’ll finish up having to do it all over again.
Remember, the cash of a flipped house is created on the purchase, not the sale. It’s also made on how swiftly you can flip the home. If you buy in May and do not sell till the following Jan, then you have been paying on that home for 7 months. If, alternatively, you sell in August, or July ( even better), then you can finish up flipping 2 or 3 more homes in that time before January, meaning you’ll make 2 to 3 times extra money in your flipping corporation.
Right now there are countless banks owned and short sale houses available which make flippers drool. If they know the keys to earning profits at it, then they’ll continue to do business. If you are the one who helps them maximise their investment, then they will be coming to you each single time.
1. Money is made at the buy, not the sell of your flip. When flipping a house your money is made at
the purchase not at the sell of the house. So, many times people buy a house with the intensions of making a huge profit only to find out that they could not make any money after all the renovations because the purchased price of the house was too high. When you purchase your property you need to be sure that after adding the cost of renovations and some minor cost additions the property will still sell for a higher price than what was spent. Never make the mistake of buying at a higher price.
2. Get an inspection on the home - Get a complete inspection done on your property, by spending a few thousands of naira on this expense you can save thousands in problems that you cannot see. Foundation, Pest, Wood Rot, Etc... By, getting a full inspection you can be rest assured that you know every thing that is wrong with the property before its too late. In the contract for the house you need to make sure that you have 7 days to have an inspection performed, and if the inspection finds problems that are going to cost more money that you are willing to spend you can get out of the contract with no penalties.
3. Don’t do the work yourself: - Get a contractor or several sub-contractors and have the work done quickly. You need to have your house flipped ASAP, so that you can get it on the market and get it sold. When I started flipping with my brother we did a house together, and we did all the construction. I had a construction background and figured it would save thousands, but it took us over 4 months to get the work done that a contractor could have had the work done in a month. But, while trying to save money on our flip, did all the work on our time off and after work, and it just took so long. On our 2nd flip we used contractors for almost everything and had the house completely flipped with a new roof, new air conditioning, new hardwood, and much more in only 3 weeks. We did not have to spend all our time working on the property and were able to spend that time looking for the next deal. This is how you get rich in real estate.
4. Place the property for Sale 1 to 2 percent below market value: If you are wanting to flip real estate and make money, the object is to buy and sell the property as quickly as possible, so that you can move on to the next house. If you purchase a house and try to sell it very high to make an extra couple of thousands on your flip, and end up holding it for 6 months you are loosing money. Get the house on the market at a price that is going to blow the competition away, and you will sell it no matter what the market conditions. We were told that you could not sell a property in this market, but we went ahead anyway and flipped our house. After 3 weeks on the market we had 3 people wanting to buy the house. Why, because we offered it at such a great deal that people wanted to jump on it. That is what you have to do especially if the market is slow.
5. Use a real estate agent - Do not try to sell your house on your own. Harness the power of a real estate agent and the power of the MLS system. When you do a FSBO you are depending on people driving by your house and seeing your sign, with a real estate agent you have some one actively marketing your house to get it sold.
Once again this will free up more time for you to look for more great deals. If you want to help the process I have found that listing your house in Google Adwords help too but I use these tools with the help of an agent to make sure I have all my bases covered.
Lots of people these days are preaching with regards to the buying and holding method of gaining wealth with real-estate. There indeed may come a time in your life or business when you’ll want to hang onto a piece of real estate, although you’ll only be considering keeping certain types of property. If you’re in the beginning stages, flipping house may be an ideal away of getting started.
The writer is a seasoned real estate investor. His publications have helped many maximize Profits and gain massive knowledge in the business of real estate investing. Agbeso believes that everybody can contribute meaningfully in the task of taking Nigeria to greater heights. He hails from the humble family of Alende Agbeso from Ubiaja, Edo State.
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