If you can get it right, there's a lot of money to be made flipping new homes.You can make $25,000 or more per flip in 90 days.You stand to lose more if you miscalculate the opportunity.It is possible to make large amounts of money by flipping houses, but also requires research, hard work, and a healthy appetite for risk.
Step 1: You need to be sure that you have enough money.
Buying a home is a part of flipping new houses.Adding another mortgage to your monthly expenses will most likely require you to come up with a down payment.The sale price will cover these expenses.You will need a large amount of cash on hand and a flexible monthly budget to start flipping houses.Other expenses, like utilities and taxes, come into play.You have to pay capital gains tax on your profit when you sell the house.
Step 2: Take care of your expectations.
flippers do more than just buy and sell houses.It will take a lot of work and money to make changes to the house.If you want to sell the house yourself, you'll need some marketing and leg work.You need to be willing to put in the work to make this happen.
Step 3: Make sure you have plenty of time to spare.
This is a full-time job and not a weekend hobby.In most cases, you'll have to schedule maintenance, oversee construction on additions or changes, and deal with other issues that arise with the house.If you don't plan to use a real estate agent, you'll have to show the house to potential buyers on your own.It would be hard to schedule that around another job.
Step 4: You should be able to deal with risk.
You'll make at least a few mistakes when flipping houses.It can cost thousands or tens of thousands of dollars to make these mistakes.Accidents can cost you thousands or cause your current project to be put back weeks or months.If you can't think and act rationally during times of stress, house flipping may not be for you.
Step 5: You should be familiar with how to buy a home.
It's second nature if you've already done that.If you've never owned a home, you should talk to a real estate agent.There are a few things you need to know when buying a home.This process includes placing an offer, getting a mortgage, and taking possession.If you want to skip the initial sale, you can build your own homes on the lots you buy.You can either build the home yourself or hire a builder.Both processes are known as spec and custom construction.
Step 6: You should research the market conditions in your area.
Talk to the real estate agent about how much demand they are seeing.You might want to look in your local newspaper for housing reports.Like the stock market, the housing market has both bull and bear cycles.The housing market can take a long time to switch from one cycle to another.Real estate may be in high demand or low demand at any given time.It will be more difficult to flip houses if your area is currently experiencing low demand.If you want to get started with flipping, you should consider moving to an area with more active markets.You can research the hottest markets online.Some areas are ready for flip investments and are currently experiencing dramatic price recoveries.
Step 7: You can find a property.
Search for the right lot within your budget once you've decided that the time is right to begin a new project.There are many ways to do this.Some people are interested in distressed properties.These are the ones that the seller is desperate to sell, for reasons such as divorce, bankruptcy, death, poor condition of the property, or late on payments.The seller's desire to sell will allow you to negotiate a better price.If you want to know where the new construction is happening, you can simply locate the areas of your city or town that are new neighborhoods.Go there, and drive around.Look for signs from builders who want to sell their homes.
Step 8: Do you want to build a home on the property?
Do your research and find out what house style, size, and features are popular in your area.Try to copy the success of the new houses that are being sold.To get a realistic idea of what you can do with a given lot and budget, you may have to assemble a team.You should plan for homes that sell in the middle to upper range.The amount where the average family would be able to afford it is what that means.Depending on your area, that means between $200,000 and $500,000.There is the largest population density looking for mid-range homes, so you want that price range.It may be less or more than the average.The home must have at least two full bathrooms and three or more bedrooms.
Step 9: Contact the builders aboutspec homes.
Another way to find a house is to look up a list of builders in your area.Ask them if they have any "spec homes" for sale.A new home with no actual owner is called that.There is a simple reason you want to find a new home.There are no renovations needed.You will get more people coming to see it than you would an older home.The margins are larger.New homes have a premium.If a person wants to live in a brand new home, they have to pay a higher price.It is almost like buying a new car off the lot, only that it will not depreciate.There are more features and amenities in the new neighborhoods.They are better with more upgrades.New homes surround your home.It's easier to flip your home because of these features.
Step 10: Take a closer look at your favorite opportunities.
You will narrow down your search to a few properties.Do some research on each builder you are considering to make sure they are trustworthy and will finish the home according to the standards they claim, such as granite counter tops, 50 ounce carpet and other specifications.They need to make sure they do quality work and inspect their other homes.If they don't have any other homes built to show you, be careful.Neighborhood trends and average values for similar houses can be seen using data from the multiple listings service.This should give you an idea of what the house is worth.The service can be used at http://www.mls.com.
Step 11: Consider the costs.
There are costs of the lot, builder's fees, and construction costs.Commissions, property taxes, and insurance are included in the cost of financing your investment.Use figures from your builder and comparable projects to total these numbers.You can use this total to compare to an estimated sale price to see if you can make a profit on the house sale.
Step 12: If you find a property that is a great deal, jump on it.
If you know that you can flip it for at least $25,000 more, immediately make an offer.You will still have time to research the builder and the condition of the home if it's accepted.The offer should include multiple ways out of the contract, such as "subject to financing".If there is a problem and you don't include this type of clause, you will not be able to leave.Subject to financing by x date is the most common.If you can't make the financing by the condition date, ask for an extension.
Step 13: Acquire financing.
You have to take out a loan in order to purchase the property.Due to the inherent risk of flipping houses, you will most likely have to take out a high interest loan.This could be as high as a 10 to 12 percent annual rate.A good credit history and score can help you get a better rate, but the loan will still be considered risky by many lenders.
Step 14: There are conditions on the home.
The date of the contract is what you have to take possession of.Your home is being built.You can talk to the builder about features and colors for the house.If you don't know how to do this, you need to find out if the builder has a professional who can help.
Step 15: You need to complete your house.
Be sure to keep an eye on the work of the builder as they finish the home.For your first few products, you might want to consult other books or experts.Adding visible luxury finishes without sacrificing too much of your budget is what you'll want to do.All neutral colors, materials, and finishings would suit any taste.Do not choose bright colors.You are "flipping" this home.The interior is being made for someone else.It's not what you want, but what the general population will like, which is neutral tones on the inside and out.Make sure the kitchen is perfect if you don't do anything else.The most important room in the house is this one.Next, look at the bathroom.
Step 16: Make your home ready for showing.
Get rid of all your construction equipment and junk.The home is going to be on the market.It has to be 100% free of stuff.If you want to understand this, you can go to any show home in your area and see how the interior has been done.If you have any furniture at all, it doesn't have to be the same as the one in the show home.Don't leave anything in plain sight.Take everything away from the cupboard, closets, drawers, basement and garage.Leaving the main living area is not a good idea.Don't use too much furniture.The rooms should not look busy.Don't put too many pictures on the walls.You want it to be clean.Don't make it a used home for your buyer if they want a new home.It should be a "show home" for them.
Step 17: The home should be listed.
You can either list it on the MLS or sell it yourself.There are thousands of real estate agents in your area who will see that MLS listing and begin showing your home daily, which is why you would want to sell through the MLS.There will be a lot of people competing to sell your home."Just you" is trying to sell it.You will give up a commission, but that can be included in the sale price.You should list your home in the area.When buying a home, you should have gotten a deal, and had already anticipated that you could resell it for at least $50,000 more based on actual market conditions and research.Don't underprice it or leave money on the table, if it will sell.It's better to underprice it and not be flexible on your asking price during the negotiation, than it is to overprice and have nobody look at it.
Step 18: Consider the situation when you get an offer.
It's never a good idea to get into a negotiation where you're trading offers back and forth.If they give you an offer, you should always tell them, "I'll think about it and get back to you in an hour".Take some time to think about it.Don't start trading offers without taking at least an hour.When you are with the buyer and they say "how about this much...", you can tell them "okay I'll take that offer and I will go and have a coffee and let you know".You want to counter the offer if they haven't offered you enough.You can structure your counter offer by taking that hour.If their offer is close to what you want but not quite, come back and say "okay, I will accept your offer but I'm not leaving the appliances".Had you gotten into a hasty negotiation, you would have lost $5000, and they might be okay with that.
Step 19: The sale should be continued.
A time frame to "remove conditions" is what the buyer of your home wants.The buyer will be serious about your home if you have an offer on it.If there is no other activity, give them an extension.If you feel like you're not getting as good a deal as you initially thought, don't extend the condition date and make the offer null and void.It will allow you to take your back up offer.You should be accommodating at this point to make the deal go through successfully.If they want to bring their family by for the third time, just let them.
Step 20: You should look for your next project.
Now that the buyer has removed the conditions, you can start looking for a new property to purchase or to try to find another one to flip the same way as you did.You have to be out when they take possession.After they take possession, you will get a big fat paycheck from the profit you made off the sale.If you port that into the new home, you'll end up buying it.It's a good idea to leave the money in your home.Don't use the money to spend.It's better to compound the effect and allow your money to go to work for you in the next purchase than to waste it on shopping and extravagance.Buy yourself a vacation out of the deal for a few grand, but let the rest of that profit go to work for you in the next home or investment where it will make you even more money.