How To Flip Houses For Profit

To begin your journey into flipping houses for profit, the first thing you want to decide on is the TYPE of flip you intend to pursue. Purchasing a fixer-upper is not the only option available to you, though it usually represents the greater return on investment.

So-called distressed owner properties offer the least amount of work, and quickest turn around. The reason? The owners of these homes need to divest themselves of the property as quickly as possible. They may be recently divorced, or due to unanticipated circumstances beyond their control, they need to relocate, possibly out of state.

Whatever the reason, the house represents an obstacle to moving forward with their lives. In exchange for an expedited transaction, they will accept a purchase price lower than what they would be likely to receive were they prepared to wait for market price. Your return on a flip of this type may be $5,000 to $10,000 or more. Remember, these houses may well be in prime condition, and your only role here is to facilitate a quick sale for the owner.

First, a tip regarding financing for your flip: check your credit score. This needs to be strong if you are hoping to get started with the minimum up front investment. If you are hoping to get investment property financing for as little as 5 percent down, rather than 10 to 25 percent down, you are going to need a credit score in excess of 720. If you are not there, take the time to work on improving it. It can dramatically improve your long-term return on investment.

Let's look now at the fixer-upper. If you have done your homework, improved your credit score, and borrowed at 5 percent on a distressed fixer that the owner is letting go for $100,000 you will pay $5,000 for the down payment, plus perhaps another $5,000 in payments over the course of the two months you spend making over the house--which costs you another, say, $10,000 in materials. That is $20,000 invested, and if you immediately resell the property at $140,000 you have pulled in a profit of $30,000. In this case you would have more than doubled your investment in a two month period. Not bad!

Of course, this optimal example assumes that you have the expertise to make over the house yourself, which is the quickest way to get the work done, since contractors have no real incentive to get the job done promptly. For best return on investment, this is a do-it-yourself industry.

Unless you are partnering with someone who knows how to pull out a wall without doing structural damage, look for properties that require only cosmetic improvements when you are starting out. That way you restrict yourself to manageable tasks, such as painting, carpet replacement, and maybe minor plumbing work.

Look ahead, and be sure you do not bite off more than you can chew. Any delay that puts off the final date of sale for the property just reduces your profit, as it cuts into the time for your next project.

The bottom line is that if you are prepared to roll up your sleeves and jump in with some manual labor, the profit potential for house flipping is very good. This is the reason why you hear self-made millionaires mention real estate projects more often than any other form of investment scheme. By the time you have flipped your first house for profit you will undoubtedly agree with them.