House Flipping Basics


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Many people are dreaming about making money in real estate. For most people this will forever stay a dream, but some individuals are able to make their dreams come true. Fact is – even the less experienced individual can make money in real estate if following some basic rules. One way to make good money in real estate is to “flip houses”. What is house flipping? Can you actually learn to flip houses?

We all have read stories about of someone that made millions in real estate. But how have they done it? Here is a quick guide how to make good money real estate. It is easy to follow and you can verify each step if you spend additional time to research it and to verify it for accuracy. Let’s assume you live in an apartment or your own house and your income allows carrying an additional mortgage payment for a few months. Keep in mind – you do not plan on keeping the objects you deal with forever. 5-year mortgage terms or ARM’s with 1-3 year terms will work for our advantage.

A good way to start is to buy so-called HUD houses. These houses are sold or auctioned off by a mortgage lender. The HUD houses usually require some fix up work, but the sales price is way below normal market values for comparable houses that are in excellent shape. HUD houses can often be bought with no or just a little money down – of course depending on your personal credit history. Once the HUD object has been purchased you start fixing the problems on the house and to bring it into a condition where it looks well maintained.

If you are good in doing stuff yourself – perfect. If not you need to look for the low-cost repair people in your area. Choose the sole proprietors that often advertise with flyers or low cost classified ads. Work out a deal with them and promise them more business if they work with you. The next step is important. Depending on market conditions you will sell the house yourself and that way save money that you usually would have to spend on the real estate agent. If you act carefully enough you should be able to produce a 20%-40% profit from the overall transaction of buying and selling the HUD object.

Important: Make sure to put some of that profit into a savings account to cover your income tax liability.

With the remaining profit you turn around and do the same thing again. Find the right HUD house and buy it. Fix it up following the same procedure as shown above and sell it. Again – put money aside to cover your income tax liabilities.

Depending on your skills and the market conditions you should be able to go through this process at least twice in your first year. With a little luck you will be able to purchase the 3rd object with cash alone or only need a small mortgage. By now you probably have streamlined certain steps and eventually build up a network of suppliers that help you to cut down the turnaround time from the moment you buy the house and sell it again.

Important: When selecting HUD houses to fix up, concentrate on those that need mainly cosmetic work. New inside and outside paint, new carpets and things like that. Stay away from houses that need structural work. Even with no experience you can do work like painting the inside walls. This is really easy to do as no furniture is blocking your way and if you are going to replace the carpet anyway.

Keep in mind that friends and family might try to talk you out of the idea of house flipping. They are afraid of the risk and of course they have never done this before. Most people avoid risk in life at all cost. Don’t listen if you feel confident enough you can do it. Sometimes you have to ignore advice to find your own luck. Keep in mind – you are buying real estate. It is not a risky stock that loses 50% value in one day. Yes, you might hit the market at a slow point, but time is on your side. As long as you can carry the additional mortgage payment for 6-12 months (worst-case scenario) you should be fine.

House flipping is a simple way to make a fortune in real estate. Plan each step appropriately. Work with a mortgage broker and explain that you only plan on keeping the house for a short time. Ask for loan programs that allow to buy with no or only small money down.

Important: When fixing up the house let psychology drive you. It’s not you who has to like the house. The potential buyer has to like it. Find out what current trends for new houses and their interior is. Choose the right colors for paint and carpet. Model homes can give you a good hint and many ideas.

There is almost no other business that allows you to make money with almost no money down in such a short time. In fact, more millionaires made their fortunes in real estate than in any other business according to statistics on the Internet. So, why should you not be the next millionaire who did it with real estate?

About the Author

Christoph Puetz is a successful entrepreneur and international book author. His small business related website is Small Business Land.One of the other websites he maintains can be found at Hosting Tutorials .


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