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Fixer Uppers And Flipping Houses

By Bruce Kirkpatrick   Follow me: Bruce Kirkpatrick on Twitter Bruce Kirkpatrick on Facebook
Wed, Mar 19, 2008 at 2:25PM

Flipping in today’s buyers market can be risky.  It may take a long time to sell the house. With home prices continuing to fall, that would make your house worth less next year.  Having the right plan is important. Make estimates that are more precise and conduct additional research so you know exactly what you are buying and what is needed for resale.  Keeping this in mind, you still can make a good investment and a good flip opportunity even in today’s market.
With so many TV shows about flipping houses, many people still think it is easy money. They say it is easy to buy will no money down or an interest only loan. Then you can do the work in your spare time, and quickly sell it.  This is seldom the truth, but with proper planning a profit can be made by buying a fixer upper.  A first time buyer could live in the house for two years while working on it. You would have the advantage of a tax break and pay no capital gains by living in the house for the required limits set by IRS.  Now for the hard part comes the hard work and sweat. This means hard work during nights and weekends for months. Are you ready for that? It can be a cost savings, but if you cannot devote time into making the necessary repairs, it can extend you timeframe and actually cost you more in expenses of mortgage payments. You might consider hiring someone to get it done quickly. Buying a house well below market price, investing the right amount of money into the right repairs, and showing the greatest profit at sale should be the goal.
When deciding which property to buy, make a list of needed repairs and the estimated cost to make the repairs. Be sure to allow for unplanned cost.  Choose to fix things a buyer can see like paint and landscaping more that things like insulation. Choosing a house with only cosmetic fixes like paint, yard work and new carpet is a good idea. Often you can complete these repairs by yourself. That saves the cost of hire someone else. Kitchen and bathroom remodeling usually pays a nice return, but do not go over the top. Always consider the neighborhood when deciding if the repair costs will the reimbursed at resale. Doing a good job is important no matter what you do. If a property needs structural changes this may not make a cost effective choice and another house to be considered.
Have a home inspection completed prior to buying will allow you to know exactly what needs repair. Offer the seller three choices, fix it themselves, hire a contractor to fix it, or reduce the sales price so you can fix it.
The purchase price of the house is most important. Not overpaying is the key to the flip working. Plan how much to buy the house for, how much to invest in repairs and selling period cost (i.e. mortgage, insurance, maintenance). Do not forget to add the cost of the realtor and owner’s title policy. Remember you will have higher taxes without a homestead exemption if you do not live in the house and make it your primary residence.

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