House flipping woes
"Flip This House" is a great TV show on the learning channel but is this a realistic option for the average person.
Not really, it seems far too many people today are thinking they can follow along and make a quick buck. The trouble is most people forget that this is a tv reality show based on ratings. And that they have many people all over the country looking for good deals. They may have looked at a thousand homes before picking one. The other problem is their cost is not going to be the same as yours. Some companies are probably not charging them for a lot of things because they get to advertise their products on tv for cheap. This lowers the developers expenses when buying the home that will be flipped.
Definition of house flipping: buying and renovating a house to sell for profit — A "flip" occurs when an individual purchases a home, remodels the home in a short period of time (anywhere from 3 weeks to 4 months) and then re-sells the home for a profit.
Many speculators are trying to buy up homes that are being foreclosed on and think they can resell for a profit just be applying a fresh coat of paint. This practice is now starting to overinflate housing prices and we (meaning the editors of decormotif.com) feel that is going to cause another real estate pricing downturn in the near future.
Putting on a fresh coat of paint and landscaping a front yard for higher curb appeal is something you should be doing anyway. Part of the problem is realators are adding fuel to the fire by telling people they can charge more for the home. In reality you are just bringing your home up to market value. Think about it, an agent is going to give you a high price quote so they get your listing. A house is rarely sold for the highest asking price. I have seen people setting an asking price only 10,000 lower than new homes in the area. Why would anyone pay that price when they can buy new for only an extra 100 bucks a month in mortgage payments.
True renovations require careful planning and should be down by professionals. It soesn't mean simply adding a new lino floor or painting the kitchen cabinets. Kitchens and bathrooms are the two main rooms that if done well will add value to your home. To renovate a kitchen you have to install new modern cupboards, new granite countertops and normally ceramic tile floors. This is going to cost anywhere up to 20,000 dollars. Bathrooms require you to install all new fixtures and finding a way to make the main bathroom larger, this can cost anywhere from 3 to 5 thousand dollars.
Another problem is if you find major structural damage in a home or even a mold problem you are legally bound to tell the prospective home buyer about it and that you had to fix it. Beleive me when I say this is going to lower the bid from any buyer.
Most prospective home buyers expect to see tile and laminate floors throughout except possibly the bedrooms, they won't pay extra for these features because they are considered standard today. Doing this will help you sell the home but not necassarily add a higher price.
This can cause many people to lose a lot of money and ruin their credit rating if they get into financial trouble because they took out a second mortgage to fip a house. For most people a safe and more realistic approach should be to buy a house that they feel can be improved on if it is in the right location and then live in it. Take the time to renovate it over the time span of a year and then sell, when they see a sellers market trend. Vacency rates in your local area are a good indication of this. If there are lots of homes and apartments for rent or to buy it is not a good time and you should wait it out.
With the mortgage meltdown happening now and will probably continue for the next six months to a year you need to be very careful.
Comments
Great ideas, I am actually thinking of getting into flipping and I think you answered most of my questions. Thanks!
Posted by: Albuquerque real estate | September 9, 2007 06:46 PM
