August 14th, 2014 10:27 PM by Dan Howard
The Real Secrets of Buy Low and Sell High
Start with an ugly house in a desirable area. The ideal house to flip is one that only needs cleaned, painted and new flooring. Keep it simple until you learn your way through the flipping process. Risk less and you will lose less and gain an education.
Be realistic and informed about why a house is selling for a low price. There is a reason something is a bargain and you are depending upon being able to change those conditions at a profit. If you do not have a background in the issues, hire an expert or inspector that does have that experience. Not all inspectors have the background education you may need.
Select a house that is not the most expensive house in a neighborhood after improvements and expenses. The least expensive home in an area will sell easier than the most expensive. People want to live in the best neighborhood that they can afford. A good rule of thumb is that the least expensive house benefits by 10% and the most expensive house loses 10% of its value in any neighborhood.
Be careful of the big issues: mold, foundations, furnace, venting, structure, infestations, water problems, sewer are a few of the problems to avoid unless you are uniquely qualified in those areas. A problem such as mold could make a home unsellable.
Develop a budget for the home before you purchase the home. You see the experts on HGTV open walls and discover a major budget problem. Know your numbers ahead of time and allow for unexpected expenses. They will occur.
Be certain to take care of the defects that can stop a sale before you have a buyer in hand. When a house is put on the market, there will be a pool of persons interested in that property. If your sale falls through because of a major or hidden defect, all of the persons who had originally considered your property may not even consider buying the property. This could add months to the time it takes to sell the home.
Understand the local requirements for the area where you are buying. As one example there are several municipalities where the sewer must pass a camera test to be sold. Failing this test could cost you thousands of dollars when you try to sell the property.
Build a good home improvement team. Too many times house flippers land up in court after a closing because of bad contractors. Legal costs can cost you more than you make on a home and involve years of stress and pain. As a corollary to this point, never, ever lie on a disclosure or to a buyer. Lying on a disclosure is like begging to be in court.
Price the home correctly to sell and select a good sales team. Failure to do so is a common mistake that could cost you additional months of time on the market and your profit.
The Very Best Advice
Find a mentor. My father is not with us anymore, so I would go to James A. Huet. Jim learned to flip homes decades ago. That was long before flipping was an industry. His incentive was four sons needing college educations. He has made four generations of my family laugh with his sense of humor and warmed our hearts with his friendship. That aside, he also knows what he is doing in Real Estate and will help anybody who asks. For the price of lunch at Massart's Restaurant you will get better advice from him that you would from those big money seminars. Wait! We just saved you $6,000. Buy him desert too!