House Flipping 101

You've heard about people making big bucks reselling homes for profit, or you've seen one of the TV shows devoted to the subject, and you think it might be for you? Flipping houses can be an extremely lucrative venture if you find the right property and plan, plan, plan.

Tip #1 Know the Neighborhood

One rule of thumb in choosing a house to flip is to get the "worst house in the best neighborhood". Choose a neighborhood that won't scare off prospective buyers. An attractive, established neighborhood will help you sell your house quickly when you put it back on the market. Of course, some people have success dabbling in "up and coming" areas too. The question is how much risk you're willing to take.

Tip #2 Stick to Cosmetic Fixes

This is especially true if you're just getting into the game and don't have experience. Simple upgrades like drywall repair, paint, and landscaping are easy to budget and make a huge impact on a home's appearance. Sure, you might be successful tackling that falling-down disaster, but your chances of running into unforeseen expenses and going over budget skyrocket. And speaking of budget…

Tip #3 Make a Budget and Stick to It

Contractors usually give free estimates. You should get a minimum of two estimates for every job (plumbing, electrical, etc). Once you choose your contractor- make sure you check their references!- carefully lay out all of your projected expenses. Don't forget "carrying costs"- your mortgage, utilities and taxes. Plan on an extra 5% for unexpected problems or delays. It can be easy to go over budget, but careful planning can help you avoid this pitfall.

Tip #4 Kitchens and Bathrooms Sell Houses

It's true. Buyers want updated, new looking kitchens and bathrooms, so a good portion of your budget should be allotted there. Generally speaking, it's a good idea to replace old or worn out flooring, countertops and appliances. If the kitchen cabinets are good, solid wood, consider sanding and repainting or refinishing them. Though time consuming, it can save you thousands and give the kitchen a brand new feel. Replacing hardware is another inexpensive and simple way to update the kitchen.

Tip #5 Don't Forget Curb Appeal

Stand in front of your flip house and really look at it. What looks good? What looks bad? Is there an overgrown tree in the yard? Would new grass or sod be in order? Never underestimate the power of curb appeal. As they say, you never get a second chance to make a first impression on your buyer. Make your house as charming on the exterior as your budget allows.

Tip #6 Don't Overprice Your Flip

When you're finally ready to list your flip house, make sure you understand what it's really worth before you determined the list price. Too often, flippers base their asking price on how much they spent rather than its fair value. If you overprice the house, it will likely languish on the market, costing you more time and money in carrying costs. Work with a realtor who really knows the area, compare your house to recent sales in the area, and then price it at or slightly below your target. It's better to generate more interest and potential multiple offers than to scare off buyers with an inflated asking price.

If you decide to get into the flipping game, do your research. These tips are just a start. With smart planning and savvy decision-making, you could soon be on your way to financial freedom.

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