Perry Henderson is a real estate agent in Austin, Texas whose client just made a $20,000 profit by flipping a foreclosed house in just a couple of weeks. Of course, house prices in Texas have been stable as opposed to Florida, for example. But in many markets flipping homes can still bring in a profit if you use your good business sense.
1. Know your local market. What were the homes selling for prior to the economic downturn? What are they selling for now? You need to know this information so you can see if these are the lowest prices in the market. Purchasing anything but the rock-bottom, lowest price will lessen your profits.
2. Research rising markets. There are very few of these markets but some investors in Washington, D.C. are flipping 4-5 properties a month, according to Justin Konz of RestorationCapital.
3. Know your restoration costs before purchase. Fix up prices should be only 5% to 10% of the purchase price in order to make the most profit.
Some investors can find profits by purchasing the worst looking homes in good neighborhoods and fixing them up to be the nicest looking. Not only are they making a profit, they’re increasing the value of the neighborhood. These are often homes paid off by elderly home owners who are looking to downsize or who have died and their families need to sell the property quickly.
Most importantly, do your research! Know your prices, evaluate the amount of repair work and how long it will take. Also hand pick your work team so you know exactly what kind of quality work you’ll get for what price.
Flipping is alive and going great in my area. There are still folks like me that are primarily wholesaling to active rehabbers. I love it!