Finding Properties to Flip
While I am not in the business of real estate, my brother was. Before he died he told me the secret of his success.
The number one problem in flipping houses is to find that property which incorporates easily correctible attributes. Most properties are priced according to their present viewable value. Features that make a property a candidate for a profitable turnover must be carefully researched .
Look for properties that show obvious signs of recent neglect but are basically sound. Peeling or faded paint, cracked sidewalks, lack of proper lighting, badly working garage doors, and overgrown shrubbery are defects that can readily be fixed. Some cash and time will have to be spent but the return will be worth it.
Items that will require more consideration are roofs ready for replacement, poor insulation, antique furnace/air conditioning and leaky cellars. If the property is worth a million or more, then the repair and replacement costs for these items will probably be easily covered.
Finding a property ready for refurbishing is not easy. You must cruise the neighborhoods on the lookout for viable candidates. When you have identified your opportunity property, you must then find the owner and make an offer. You may have to question the tenants as to who the owner is and where he can be found. Sometimes you can find the owner through the tax records. Frequent visits to the property may be necessary to corner the owner. If you can get the owner to state a price for the property, be prepared to immediately accept the offer and place a good faith deposit. It is a good idea to bring along a witness. The owner may be surprised that his first high offer was accepted but keep in mind that the eventual sale price will be double or more.
Contracting out the major renovations can be tricky. Have every local contractor you can find make an estimate for the work. Keep in mind that contractors try to keep their workers busy during the slack season and will try to underbid his competitors to get the job. He may even have in mind upgrading the underbid later to cover his costs so it would be wise to have him sign an iron clad contract upon acceptance of the deal. Don’t forget to incorporate a time limit and penalties for non-completion. Much money can be saved by doing some of the work yourself. Interior painting, shrub replacement, trash removal and window treatments are labor intensive chores that you may be able to do yourself. New aluminum siding is one expensive renovation that has a high return when reselling.
Attractive floors are placed high on the list of desirable features. Old rugs must be replaced, wood floors must be sanded and varnished and new tile installed where needed. Kitchen cabinets that look new play to the real decision maker, the woman in the family. Counter tops can be easily changed for a new look. Interior walls should be painted in neutral tones like bone or oatmeal with a slightly darker tone on the woodwork. All ceilings should be white. The front and back doors should work flawlessly. Check to see that often used windows raise and lower easily.
Financing can be supplied by a local bank. If the property is turned over quickly, no taxes will be applied. Look into the investment incentives offered by the government and hired a good accountant for the paperwork. Ten years of hard work and a little luck will get you retired while you are still young.
Retired portrait photographer. Have something to say?
