Four Strategies for House Flipping
Profits from house flipping come from buying low and selling high and often in a rapidly-rising market or by buying a house at a deep discount that needs major repairs and fixing it up before reselling at a higher price to a retail buyer (a home owner).
Here are a few strategies for you to start house flipping:
#1: Buy, Fix, and Flip
Let's start with the most common--the good old "fix ‘n flip."
This is when you buy a property that needs major improvements or renovations. You fix the house and then sell it on the "retail" market to a homeowner who will live in the house.
This strategy is true and works very much like magic.
You can easily make $15,000, $25,000, $50,000 or more on one deal house flipping depending on your market and how good you are at finding real estate at steep discounts.
The danger with fix and flips is either paying too much or underestimating the amount of repairs needed.
Be very careful and conservative in your fix-up costs and the length of time it may take to resell the home to a retail buyer. Also make sure you consider the cost of paying a real estate agent to sell the property for you.
#2: Buy, Refinance, and Lease Option
Rather than selling the fixed up property for cash to a retail buyer you can sell for terms to maximize your cash flow.
Once you have completed the rehab, refinance the property at its new appraised value.
If you did the math correctly and you didn’t underestimate the repair cost you should have little or no money in the deal. Sell the property to a lease option buy.
The rent payment from your tenant/buyer should cover your mortgage payment and all your additional cost. A good buy, refinance and lease option deal must have positive cash flow after you pay for all your monthly cost.
When your tenant exercises his option, you receive a very large check. If the tenant does not exercise his option, you get to find a new lease option buyer and collect a new option fee.
To Learn All About Lease Options Click HERE
#3: Wholesale or Buy and Flip "As Is"
If you don't like to do fix-up work because you don’t like to get your hands dirty consider selling the property "as is" to a fix and flipper buyer.
If the local real estate market is hot you should be able to sell the property in poor condition just a little below market to a wholesale buyer.
This works best with houses in "transitioning" neighbourhoods or houses you buy at deep discounts.
Make sure that you acquire the property cheap enough that you can sell it below market quickly and still make a profit. Unlike in a fix and flip here you will make $5,000 to $10,000 per flip because your buyer will be a fix and flip buyer.
The advantage with this house flipping strategy is you get paid very quickly. Here you get paid in weeks whereas with fix and flip you get paid in months.
This is my least favourite and I do not recommend this type of house flipping for the inexperienced.
In very hot real estate markets real estate values can appreciate as much as 2% per month. If you time your real estate purchase right, you can put a contract on a pre-construction house or condominium and then flip it to a retail buyer when the development is completed.
It can take 12 to 18 months for the development to be complete and if the house or condo price is $500,000 you could potentially make $100,000 or more in one month or less!
Of course there is a down side to this.
You could end up losing a lot of money if the local economy tanks and you could end up with a worthless house or condo that you won't be able sell to anyone.
Use this approach very carefully…this is high house flipping and I don’t recommend it to a new investor.
The fact is "House flipping" is a great way to make some fast money.
These strategies work very well, are very ethical, and are very profitable!
Return from House Flipping to HOME
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