I am "Flipping Out"!!
I have been in the Real Estate business for 20 years and have seen the good, the bad, and the ugly. Think 2004-Mid 2007 as the good, 2009 and 2010 as the bad, and early 90's ( recession ) and late 2007 (beginning of the price corrections ) as the ugly.
Now that the worst of the ugliness is behind us, some great opportunities have been popping up in the aftermath. Great opportunities? You bet! I am talking about "Flipping" homes. A home flip is simply purchasing a property that is in need of some "fix-ups", doing the work, and reselling the home for a profit. Sounds pretty easy, doesn't? If you watch cable TV you have probably seen some of the "flipping" shows and it certainly looks easy on TV. NOT!!!
Successful flippers have to be able to acquire the home at a low enough price to be able to fix it up and sell it for more than their total investment. The challenge is in the analysis. Let me explain. In a flip, you have to work backwards. First, you must determine the market value of the home after you have completed the renovations. Next, you need to estimate what it will cost to complete the work. Then you calculate all the additional expenses to acquire the property and sell it ( commissions and closing costs ). Next, add in a projected profit. Now do the math and see what you can pay for the property to make a profit. If the price you are willing to pay is acceptable to the Seller, you could be on your way to a successful flip.
Example of a Flip analysis:
A house that is in disrepair is on the market for $240K. You believe that the "fixed up" value for the home is $350K based on comps in the neighborhood. Your contractor has been through the home and given you an estimate of $60K to do the renovations. You want to make a profit of $30K. The math would look like this:
Sell for $350K
-$60K for renovations
-$12k for renovation over runs (20%)
- $28K for selling expenses
-$30K for profit
-$5K for closing purchase
The result is that you must purchase the property that is listed for $240K for no more than $215K.
My best advice to a future "Flipper" is this:
Use an experienced Real Estate agent to assist in finding properties and analyzing the fixed up market value. Your contractor will make or break you. Get referrals from people you know and do your due diligence before you commit to a contractor. If you can find one that is experienced in flips in your market area that would be ideal. Oh, and one more thing, you will probably "flip out" a bunch of times before your "Flip" is complete!
Look for your next flip by searching the entire MLS in real time. Click the link below:
Rick Reed, G.R.I., CDPE- Certified Distressed Property Expert
Assoc. Broker/Owner "The Congressional Team" RE/MAX
Licensed in MD & Wash DC
8937 Shady Grove Court
Gaithersburg, MD 20877
Office: 240-403-0399 X306
Can I help a friend or family member with their Real Estate needs? You can count on me!