So you want to flip properties? OK, that's a whole different ballpark, so let's talk.......
I've had quite a few clients lately that are starting to see more and more properties being flipped, and they're thinking they'd like to be part of the action.
I'm very encouraging with them, because I feel personally that it's a very fulfilling endeavor.
However, there is definitely a recipe that you'll need to be successful with it.
How they plan on purchasing the property is a big factor.
Do they plan on using a loan? If so there are entirely different loan requirements for investment property than there are for owner-occupied properties.
And it's important to remember that you will be carrying a mortgage payment the whole time you are doing the modifications to the home, which is something that needs to be planned conservatively for.
If you're able to do it, your best bet is to pay all cash for a property that you plan to flip. This way, that is not an expense you have to deal with while you are making modifications to the property.
If you do not have the cash, then the 2nd best thing is to find a financial investor/partner to purchase the property with cash. This way, you're not carrying a mortgage, AND as an all-cash buyer you have MUCH more leverage with price. And more importantly neither you as the buyer nor the seller need to worry about loan requirements for the purchase that are related to the property.
KNOW YOUR NUMBERS!! You really need to have a high amount of expertise with property values in that area to be able to calculate what the home will sell for once it has been renovated and ready to sell in turn-key condition.
KNOW YOUR POOL OF POTENTIAL BUYERS! For example, if the price range that the finished property is projected to be in dictates that most of your buyers will be FHA buyers, then you need to make sure that the home will meet FHA requirements both physically and legally. This is where working with a highly experienced agent is critical.
Use the right contractors for the job. Unless you are an experienced contractor yourself, don't try to take the DIY approach to flipping homes. Not a good idea!! Especially in a highly litigious state like California.
Make sure you cover the liability element of flipping homes with the right business entity you operate under. Many flippers buy and sell under a corporate or LLC limited partnership status to limit any potential liability.
These are just some highlights, and there are many more points to consider.
But once you have the right recipe, flipping residential properties can be both lucrative and fulfilling from a creative standpoint.
And the coolest part is that you're creating a nice safe, affordable home for someone.
Peace....
