Five Tips for Profitable Purchasing for Resale (Flipping)
First I hate the word flipping, as it is actually a big no-no to “flip” homes. But in today’s media world the term has came to mean buying a home for less than what you hope it can be sold for and making a profit when selling. In any case the home bought should be currently under some form of duress, either in need of repairs, outdated, the seller in financial trouble, poor market, bad neighborhood, etc. Obviously for someone wanting to “flip” the less cost and work needed the better. However I think there are 5 basic rules for the beginning Home Re-Seller or flipper to follow. As you move on to more and more deals there are many other areas to consider, but in most cases I think the first time flipper over thinks the deal and often loses on good opportunities. Paralysis by Analysis so to say. In any case here are my 5 tips for a successful purchase for resale Home transaction.
- Buy it Right – profit is made when buying not selling. That actually is counterintuitive to most people but let me explain. When selecting a property to purchase you must consider the neighborhood, financing term, price, condition, cost to bring to selling condition and contingent exit strategies. I have a client that says he can buy ANY house and fix it to sell and make a profit for $10,000. Right… but that’s his strategy but he also buys the homes right. He knows what to look for and how to buy homes that will work for him. He also knows that asking price for a home in duress in more of a suggestion than a fact, if not he moves to the next one.
2. Don’t Over or Under Do it – The “It” can be many things, from over or under analyzing you must stick to your strategy and not deviate from it, period. It could be over improving by putting granite countertops and Viking Appliances in a 1000 square foot ranch in a $100,000 neighborhood, or under improving by leaving outdated vinyl floors in a 3000 square foot home on the golf course, and the green avocado 70’s appliances. That is a case where the money to replace is well spent.
3. Set a Budget – Do your homework! – And ask for a cheaper price from any contractor, or supplier. All they can say is no, if it’s only a few bucks that’s fine it adds up. Never be afraid to shop around on your suppliers or contractors too and let them know. That is an entirely different subject for another day.
4. Kenny Rogers Rule – Know when to hold ‘em and when to sell ‘em. Don’t fall in love with a house! This also leads to another good piece of advice I have picked up over the last couple of years, actually its two pieces combined into one: “Every deal stands on its own and you will never go broke making a profit”. Consider more than the offer price when deciding to sell a property or not.
5. Stick to what you Know and where you know – don’t be afraid to ask! Unless you know the Destin Florida market well, you shouldn’t be buying there. If you are doing well in the $120,000 price range why buy in the $500,000? There is something to be said for staying the course.
Obviously there are thousands of other possible considerations but these are 5 tips that if followed should point you in the right direction.
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