Some repairs can cost the investor more than he can earn from the sale of a house.
Flipping houses applies the same basic concepts as that of any retail business. You find the product that people want. You buy the product at low cost. You make necessary adjustments to the product to attract the most buyers at the best price. Then you sell the product to the consumers at a higher price than you paid for and put into it. Finally, you move on to the next sale. You can start a career and make a profit in the real estate industry by finding, fixing and selling houses (products).
Instructions
Finding a House
1. Consider your end goal first when you look for property. Choose areas of the city in which people actually want to live. Pick your target neighborhood. Consider subdivisions near schools, easy access to highways or grocery stores and other shopping areas. Set your personal buying criteria. Decide to what extent you are willing to renovate a house.
2. Find a real estate agent who is familiar with those areas and has listing in those areas. Get pre-approved for a bank loan so that you will know how much money you have to spend. Partner with another investor if you cannot come up with enough funds on your own. Solicit other investors to pool your money to buy the properties you want most.
3. Generate leads. According to real estate investors and authors, Rick Villani and Clay Davis, "A lead is any information that 'leads' you to a potential investment property or a potential seller of a house. It can be an address, a personal contact, or a name on a list." Create business cards and signs that let homeowners who are looking to sell their homes know that you are interested in buying. Place your signs around the area. Pass out your business cards whenever you talk to people who may know someone who wants to sell.
4. When you get a call for a potential property, verify that the house meets the buying criteria you have set for yourself. Hire a trained home inspector. Get a recommendation from your real estate agent, a real estate colleague or mortgage loan officer. Perform an inspection of the property to assess the cost to renovate the property. Identify repairs and improvements that need to be made and estimate those costs.
5. Negotiate with the homeowner. Take the repair and improvement costs into consideration when making your offer. Close the deal and take ownership of the property.
Fixing the House
6. Hire a contractor, or if you are handy, get your own industrial tools. CNN/Money writer Sarah Max writes, "Develop a list of reliable contractors, plumbers, electricians, drywallers and other experts to call on." Go over the list of repair projects and establish a step-by-step schedule for completing each item.
7. Familiarize yourself with zoning laws and building codes to make sure you don not make any additions to the home or landscape that violate laws or codes. Obtain any required permits for any additions or renovations.
8. Address any plumbing and wiring issues before you commit to cosmetic renovations. Address potential safety hazards, such as mold, a crumbling roof or pest problems. Follow the checklist provided by a trained home inspector.
9. Create curb appeal. Mow the lawn, trim the hedges and pull weeds. Paint the exterior of the house to match with comparable homes in the neighborhood.
Selling the House
10. Furnish the house lightly so that potential buyers can get a sense of what it would be like to live in the house. Use light colors and thin drapes to allow light to flow into the rooms and make the rooms appear more open and bigger.
11. Take pictures of inside and outside of the house. Hire a professional photographer to take the pictures because it may be the first impression a potential buyer has of the property. Post the pictures online and list the house with your real estate agent and any online listing sites available.
12. Post a listing with a picture of your home for sale in the classified section of the newspaper if your real estate agent has not done so. Ask the real estate agent to create a flier that you can pass out at events, leave on magazine stands at grocery stores or mail to potential buyers.
13. Plan an open house and allow potential buyers to review the house and make an offer. Negotiate the sales price. Real estate expert Piper Nichole explains that to be better at negotiating you should predetermine the lowest offer you will take. She advises to make yourself market savvy by knowing the sale price of other comparable homes. Regularly read newspapers and real estate publications. Accept multiple offers at a time from different buyers so that you have real leverage. Complete the paperwork at closing and sign on the dotted line.
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