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Aspiring real estate moguls may turn to flipping condos and houses to earn a sizable income and get a quick profit. But even if flipping real estate properties seems promising, it's not as easy as it seems. It takes more than just getting the property clean, freshly painted, and redecorated to earn a good profit from this venture.
Flipping doesn't just require patience and skill but also some good timing and adequate funds to get the property fixed and to put it on the market. If you're wondering how flipping works, here are some tips and ideas on how you can find diamonds in the rough and avoid the flop:
First, you must know the risks when flipping.
Flipping can easily turn into a flop if you spend too much money fixing the property and putting it on the market only to get offers that are way less than you're expecting. You may have to wait way too long to find a buyer and sell the property. The longer the property sits, the more you lose money paying for the taxes, mortgage, and maintenance. The housing market may not be in your favor.
- Before you dive into buying and selling properties, you must be familiar with the current market conditions and trends. Understand how it works, know what properties are easier to sell according to consumer preference and demands.
- Find out which location or neighborhood would be a great place to invest. The flipper must also know the deal when it comes to real estate prices and should be aware of the profit margins.
Look for a property that you can flip without draining your coffers and can sell for a profit easily.
Hold up. This house might be cheap, but is it worth it?
- Nothing comes easy when it comes to flipping. You can't just look for the cheapest property on the market and expect to sell it big after a few fixes and some makeover. That's not really how it works. You have to find a property that can be turned around without exceeding your budget and exhausting all your resources.
- If the house you bought on a bargain will require a lot of repairs and some overhauls, then this may not turn into a good ROI (return on investment), because of the time it'll take to finish the improvements and the funds it'll require to make the property appealing to the market. Check the property to see what needs to be fixed (a run-down yard, walls that could probably use some new paint, old flooring that could be polished). Fixes that require minimal funds but some hard labor can be a good starting point.
- The flipper can take advantage of foreclosed properties. Some sellers are eager to get the property out of their hands for reasons like divorce, death in the family, and late payments, and bankruptcy. These are also good options to look into. Give serious thought on the price range and the features home buyers look for to get a property that's easier to sell.
Identify the needed fixes and cosmetic changes and set some realistic budget and timeline for these.
- Don't get too attached with the property. Remember that this isn't your home but an investment that you can sell for a profit if the right cosmetic touches and fixes are done.
- When renovating a property, focus on fixes that can improve the value of the house or condo. However, you must be careful not to go over the budget. The fixes and changes should be practical. Don't underestimate the cost. Set a realistic budget and timeline for the renovations.
- You may hire a contractor for major repairs or have your own team to do the work. For major repairs, let professionals handle the job. If you can do some fixes on your own (touching up old furniture, painting walls, putting a new carpet, for instance), then that would help cut down some costs. As much as possible, you'd want to save on labor fees but shouldn't sacrifice the outcome or quality of the job, which can cost more if the fixes all fail.
Sell the property at a good price.
- Set a good price range based on the value of the property and the cost of renovation. You should be able to make good profit out of your investment.
- You can work with a broker in selling the house or put up your own ads and have an open house.Highlight the practical features of the house or condo. Appeal to the senses of your prospective buyers.