4 Keys to Buying a Flipped House

Many home buyers wrongly assume that a newly renovated home is, well, just that: new. They perceive it as move-in ready and free from hassles. The newly renovated home typically pulls in top dollar, because the buyer assumes it is perfect, turnkey and ready to go.

Although house-flipping shows on television often make the process seem easy and feature beautiful homes with happy stories, they don’t follow through to see how the home withstands daily use, weather patterns and typical wear and tear.

Some contractors or property flippers want to move on to the next job as soon as the first one nears completion. Others may uncover unforeseen expenses that send them over budget. As a result, their work may be rushed or subpar.

If you’re buying a flipped house — one that the seller purchased less than one year earlier — the following tips will help ensure you don’t get any unpleasant surprises after closing.

Pay attention to details

As tempting as it can be, try not to get caught up in the excitement of new appliances, marble baths and other fancy bells and whistles. By looking closely at the details, you can learn a lot about the quality of work done on the property.

Be on the lookout for telltale signs of rushed worked such as:

• Light switch plates that aren’t flush with the wall or are at an angle.
• Crown molding that isn’t completely matched at the corner.
• Gaps between the countertops and the wall.
• Gaps in bathroom tile.
• Doors or cabinets that don’t close tightly.

Cosmetic mistakes could be an indicator of larger issues that can’t be seen with the naked eye. If the flipper was sloppy on the small details, pay extra attention to other areas such as the electric panel, the water heater’s gas line, and plumbing connectors.

Get an inspection

Because many buyers assume a newly renovated house is in like-new condition, they think it’s okay to skip the inspection. That’s not a great approach, however.

An inspector can check the contractor’s work, and may find issues buyers would miss. For example, were renovations done to code?  Did the contractor cut corners or do the bare minimum in places because of a tight time frame?

Sure, the town/city likely would have had to sign off on the renovations, but city officials are only looking at health and safety issues. The home inspector can check the house from top to bottom. It’s worth paying for an inspection to ensure the home is perfect.

Double your due diligence

When buying a flipped home, it’s more important than ever to review the disclosures. Did the contractor take out permits for the work? If so, were all the permits signed off on?

If you aren’t given copies of all the work approvals or finalized permits, ask for them. If you don’t get them, look them up online or go to the local building department. Any permits taken out or applied for (and officially signed off on) are public record.

Never close on a home without making sure all permits were cleared. Otherwise, as the new homeowner, you could be on the hook for illegal or bad work.

Learn all you can about the flipper

Is the owner the contractor, and is he experienced? Does he have a good reputation in your community? Ask your agent about the background of the person who flipped the house.

Good investors have been at it for a long time, and their reputations precede them. A flipper with a solid reputation should have nothing to hide, and should be open and free with disclosures and provide you with documentation and warranties. Good home flippers want happy customers, too. They don’t want calls from buyers or attorneys a year later with liability issues or complaints about their work.

In the past 18 months, there has been a marked increase in the number of homes bought simply to be renovated and put back on the market. While the improvements may be done well, there’s also a chance the contractor or flipper cut corners or rushed through the project, simply to move on to the next one — leaving the new homeowner with a nightmare on their hands.

Flipped homes should always be double- or triple-checked for potential issues. Inferior work could end up costing you money and giving you headaches in the long run.

Source: Zillow, Brendon Desimone
http://www.zillow.com/blog/how-to-buy-a-flipped-house-157539/

Flippin' A House Isn't Easy: 7 Things To Consider Before You Take The Plunge

Turn on HGTV or any number of other channels almost anytime during the day or night and you're bound to find at least a couple of shows about flipping houses. Some provide a cautionary tale about overextending yourself financially or making other rookie flipping mistakes, but the vast majority end up with a profit of $30,000, $60,000, or $100,000+ in profit for a couple of months (or a couple of days, in the case of one new flipping show).

Enticing, right? If you're getting ready to plunk down cash for your own flip, here are a few things you need to think about.

1. Make sure you've got the money

Sounds obvious, but…do you really know the financial stakes involved? "The first expense is the property acquisition cost. While low/no money down financing claims abound, finding these deals from a legitimate vendor is easier said than done. Also, if you're financing the acquisition, that means you're paying interest," said Investopedia. "Every dollar spent on interest adds to the amount you will need to earn on the sale just to break even."

If you're planning to pay cash, you won't have to worry about interest, but you will have carrying costs including utilities, property taxes, and HOA fees where applicable.

Here are a few other options for buying property to flip, courtesy of Auction.com: "If you don't have enough cash to purchase a home, the next cheapest source is a home equity line of Credit (HELOC). These are low-interest, variable-rate lines of credit that are secured by either your primary residence or an investment property. Typically, the HELOC rate is set about 1–2% above the prime rate. You need to put the HELOC in place before you bid on any homes; then you can bid on the home as a ‘cash deal,' rather than as a ‘financing deal.' Many investors use hard money loans or other conventional mortgages to finance their flips. Because of the higher interest rates and points paid at closing, both will reduce your net profit considerably, and are not recommended for flips unless absolutely necessary."

2. Buy in the best location you can

"Expert house flippers can't stress this enough," said MoneyCrashers. "Find a home in a desirable neighborhood, or in a city where people want to live." And keep in mind the convenience factor—for the potential buyers, certainly, but also for you. "You will work on this house daily in the weeks and months to come. Do you really want to work all day, and then drive an hour to get home? Don't invest in a house too far away from where you live; you will spend more money on gas, and it will take longer to fix up the house."

3. Work with a realtor...or become one

Tying to maximize profit by selling a flip yourself rarely works out well if you don't know what you're doing. If you think trying to figure out if the wall you want to take down is load bearing is complicated, just try to figure out disclosures and conditions without going to real estate school. The money you spend on a Realtor commission can be well worth it for the ability to concentrate on other things and know the sale is in good hands.

Beyond getting the home sold, good real estate agents can be helpful in other important ways when it comes to flipping. "They can help you find great deals, get you comps, help you connect with lenders or contractors, and a lot more," said BiggerPockets. "Don't settle for an average agent though—find a great investor friendly agent."



4. Check the comps. And check them again

Speaking of comps…you can't make a smart decision on buying, fixing up, and flipping a house if you aren't aware of the prices in the neighborhood. And that might be easier said than done. In states like Texas, home sales are not reported and are not public record like they are in states like California. Do your research so you know what you're up against.

5. Make smart updates

Knowing where to spend your money is key to a successful flip. You don't want to leave key areas untouched but you also don't want to over-improve for the neighborhood. "Home improvements that increase the value of a home might include upgrading kitchen appliances, repainting the home's exteriors, installing additional closet storage space, upgrading the deck, and adding green energy technologies," said MoneyCrashers. "On the other hand, avoid home improvements that won't increase the selling price, like installing a pool, installing a whirlpool bath, or adding a sunroom to the house."

This is another good reason to use a Realtor who is a local expert: they'll be knowledgeable about specific updates that are important in your market.



6. Use good products

Scrimping on construction costs may seem like a good idea if it means your financial commitment is lower, but low-end materials might not get the home sold or fetch the sales price you want.

7. Work with good people

Everyone you work with has the ability to make your flip a success or derail it. Partner with those you can trust, and don't forget to make sure they're qualified for their role. A bargain basement subcontractor that does a shoddy job on your floors can end up costing you thousands when you have to have it redone by a professional.

On the flip side, "The real money in house flipping comes from sweat equity, said Investopedia. "If you're handy with a hammer, enjoy laying carpet, can hang drywall, roof a house and install a kitchen sink, you've got the skills to flip a house. On the other hand, if you've got to pay a professional to do all of this work, the odds of making a profit on your investment will be dramatically reduced."

Source: RealtyTimes, Jaymi Naciri
http://realtytimes.com/consumeradvice/buyersadvice1/item/43128-20160317-flippin-a-house-isnt-easy-7-things-to-consider-before-you-take-the-plunge?tmpl=component&print=1

House Flipping: A Guide For Success

Flipping a house means buying a home with the intention of fixing it up and selling it within six months for a profit. Americans flipped 26,947 single-family homes in Q3 2014, accounting for 4 percent of all home sales in that period, according to real estate data firm Realtytrac. The average gross return for investors was $75,990 per home, up 2 percent from Q2.

Flipping houses can be profitable, particularly when home values are rising and interest rates remain at historically low levels. The Federal Housing Administration stopped enforcing anti-flipping regulations—which prohibited insuring any home for less than 90 days—in 2010. If you're looking to get into the home flipping business, follow these four guidelines for the best chance of success.

Build a Bankroll

Everything in life requires money, and house flipping is no exception. You could take out loans to buy properties, but then you are just creating debt in the hopes of making money. A smart house flipper who wants to profit immediately will often use his or her own money.

The best way to build a bankroll is by saving over time. Consider selling your own home if the proceeds will pay off the mortgage and leave you with enough to get started. Those currently receiving regular payments from a structured settlement or annuity can consider selling their future payments to a company like J.G. Wentworth for a lump sum of cash now. Make sacrifices like selling off an extra vehicle, disconnecting cable television and giving up the $5 lattes in the morning to pad your bankroll further.

Buy at Discount

You'll make the most money if you buy a house for less than its actual value at the time of purchase. The best way to do this is by seeking out motivated sellers. These are people who need to sell quickly to relocate for a job or simply need to make fast money.

Use your social media networks to generate referrals. Inform friends and followers that you are looking to buy properties. Knocking on doors in prime neighborhoods can also generate leads—target homes with "for sale" signs and distressed properties that appear neglected.

Location, Location

The total value of all homes in the U.S. was $27.5 trillion at the end of 2014, according to data compiled by Zillow. That represents a 6.7 percent increase from 2013 and the third consecutive year of positive gains. But certain markets are doing even better.

Miami, Atlanta, Houston, Orlando and Las Vegas experienced the largest gains for 2014, with each up at least 11.5 percent on the year. These markets offer the largest margin for error for those flipping homes, particularly with a major housing market correction being predicted by several economists for 2015. This is mostly due to the Federal Reserve ceasing its quantitative easing program and no longer artificially inflating the markets.

A good rule of thumb when buying in areas that experienced low or negative year-over-year home value change (i.e., Indianapolis and Phoenix) is to only purchase homes at 10 percent or more below current market value.

DIY Where Possible

You'll likely need to hire plumbers, electricians and other contractors to tackle major home improvements. But the more you do yourself, the higher your profits will be. You and a few friends can install new sinks and countertops and even shingle a roof. Youtube has hundreds of instructional videos that cover everything from replacing water heaters to installing shower faucets. Creative landscaping can increase the value of a property by 13 percent, according to a study by Virginia Tech University. The DIY Network has several ideas for easy landscaping projects that anybody with a little ambition can complete.

House flipping is a cyclical endeavor that is only profitable when economic conditions are positive. Now is a great time to get started.

Source: RealtyTimes
http://realtytimes.com/consumeradvice/buyersadvice1/item/42438-20160219-house-flipping-a-guide-for-success

ABC Nightline on Flipping

Here's a great video I found on RealtyTrac's website regarding the realities of house flipping. Over there years I have seen many so called "reality TV" shows on cable TV that portray house flipping as easy. Then I often hear radio commercials as I am driving in my car of some huckster or another promising real estate riches if you can just pay $100 for his guaranteed to work house flipping system. Well, if you're on the fence about flipping houses for profit, I suggest you watch the below video before you get suckered into something you're not prepared for. I am not saying buying houses, fixing them up, and selling for profits is not a way to make money, just know what you're getting yourself into.

Related:
5 Mistakes That Make House Flipping A Flop

Survey: Flipping Trend Continues to Gain Momentum Among Investors

The rising trend of home flipping around the country seen in Q4 continued to build momentum among investors in nearly every market surveyed in Q1, according Auction.com's First Quarter 2015 Real Estate Investor Activity Report released on Monday.

The percentage of investors surveyed who said they intended to flip the properties they bought rose by 6.5 percent in Q1 from the previous quarter, according to Auction.com. The rise of that trend was especially evident in the Western States, where the ratio of investors who preferred flipping as a strategy over renting was as high as three to one in some places. The percentage of investors in both California and Washington who said they preferred to flip was 75 percent, compared to 24 percent for renting. The percentage of flippers in Nevada and Idaho was 79 percent and 71 percent, respectively.

“It seems clear that the unusually low inventory of homes for sale has led to higher home prices, which makes it challenging for investors to rent homes out at a rate that’s profitable, and still affordable for tenants,” Auction.com EVP Rick Sharga said. "So in states like California, Washington, Nevada, and Arizona a large number of investors have decided that the best opportunity today is to meet the demand of prospective homeowners by buying, fixing, and re-selling investment properties.”

Overall, 53.5 percent of investors surveyed said they preferred flipping, while 44.8 percent said they intended to rent the houses they purchased. A larger portion of real estate investors (55 percent) and investors working on behalf of another investor (66.3 percent) said they intended to flip, while a majority of investors making a one-time purchase (66.9 percent) said they intended to rent.

Auction.com's survey was collected from investors who bid on properties both online and at live events nationwide during Q1. Investors purchasing at live events generally preferred flipping over renting (62.1 percent compared to 36.7 percent), while investors purchasing properties online tended to lean toward renting over flipping (54.5 percent compared to 43.5 percent).

The majority of investors who purchased only one property per year preferred a hold-to-rent strategy (60.8 percent), while more active investors tended to prefer flipping. Fifty-nine percent of investors who purchased between two and 49 properties during the quarter said they intended to flip, as did 53.6 percent of investors who purchased 50 or more properties.

"Historically, individual investors have owned over 95 percent of the single family homes available for rent," Sharga said. "It looks like these investors are coming back to the market, and filling a growing market need for rental units."



Source: DSNews, Brian Honea
http://dsnews.com/news/04-20-2015/survey-flipping-trend-continues-to-gain-momentum-among-investors

Where the hot house flipping markets are

I haven't dealt with too many house flippers in my real estate business. When it comes to buyers I mainly deal with first time home buyers, like the married couple that has a couple of kids, or are planning on having kids, and they are just looking for a home for their family. Now I don't mean to say I have a problem with house flippers, it's just that there are not too many of them here in the Silicon Valley. That is largely due to the high median home price in this area and the fact there aren't too many fixer uppers here. And a new report from RealtyTrac supports my claim that Santa Clara County is not the most popular place for flippers.

House Flipping Data

A year after its Spring 2014 report showed the ten most profitable U.S. markets for flipping houses, RealtyTrac® turns the data tables to find where the practice made up the largest proportion of sales in 2014.

They are not the same: Only the highest-ranking city this year is within a Metropolitan Statistical Region (MSR) on last year’s list.

Flipping a house is real estate jargon for buying, improving and then reselling a property within six months. Inkster, Michigan tops this year’s list with flipped houses accounting for 27 percent of its total 2014 home sales. The Detroit suburb showed up last year within the ninth-ranked Detroit-Warren-Livonia MSR.

The second ranked city on this year’s list is Opa Locka, Florida, with more than 21 percent. Though its surrounding Miami-Dade County was not included last year, three that did are right up the Atlantic coast.

The other eight cities on this year’s list, below, are all in Michigan, Georgia and California.

Source: RealtyTrac

http://www.realtytrac.com/news/data-lab/house-flipping-data/

House Flipping: A Beginner's Guide For Success

Happy Saturday everyone!

Great article from RealtyTimes for you house flippers out there.

HOUSE FLIPPING: A BEGINNER'S GUIDE FOR SUCCESS

Flipping a house means buying a home with the intention of fixing it up and selling it within six months for a profit. Americans flipped 26,947 single-family homes in Q3 2014, accounting for 4 percent of all home sales in that period, according to real estate data firm Realtytrac. The average gross return for investors was $75,990 per home, up 2 percent from Q2.

Flipping houses can be profitable, particularly when home values are rising and interest rates remain at historically low levels. The Federal Housing Administration stopped enforcing anti-flipping regulations—which prohibited insuring any home for less than 90 days—in 2010. If you're looking to get into the home flipping business, follow these four guidelines for the best chance of success.

Build a Bankroll

Everything in life requires money, and house flipping is no exception. You could take out loans to buy properties, but then you are just creating debt in the hopes of making money. A smart house flipper who wants to profit immediately and often will use his or her own money.

The best way to build a bankroll is by saving over time. Consider selling your own home if the proceeds will pay off the mortgage and leave you with enough to get started. Those currently receiving regular payments from a structured settlement or annuity can consider selling their future payments to a company like J.G. Wentworth for a lump sum of cash now. Make sacrifices like selling off an extra vehicle, disconnecting cable television and giving up the $5 lattes in the morning to pad your bankroll further.

Buy at Discount

You'll make the most money if you buy a house for less than its actual value at the time of purchase. The best way to do this is by seeking out motivated sellers. These are people who need to sell quickly to relocate for a job or simply need to make fast money.

Use your social media networks to generate referrals. Inform friends and followers that you are looking to buy properties. Knocking on doors in prime neighborhoods can also generate leads—target homes with "for sale" signs and distressed properties that appear neglected.

Location, Location

The total value of all homes in the U.S. was $27.5 trillion at the end of 2014, according to data compiled by Zillow. That represents a 6.7 percent increase from 2013 and the third consecutive year of positive gains. But certain markets are doing even better.

Miami, Atlanta, Houston, Orlando and Las Vegas experienced the largest gains for 2014, with each up at least 11.5 percent on the year. These markets offer the largest margin for error for those flipping homes, particularly with a major housing market correction being predicted by several economists for 2015. This is mostly due to the Federal Reserve ceasing its quantitative easing program and no longer artificially inflating the markets.

A good rule of thumb when buying in areas that experienced low or negative year-over-year home value change (i.e., Indianapolis and Phoenix) is to only purchase homes at 10 percent or more below current market value.

DIY Where Possible

You'll likely need to hire plumbers, electricians and other contractors to tackle major home improvements. But the more you do yourself, the higher your profits will be. You and a few friends can install new sinks and countertops and even shingle a roof. Youtube has hundreds of instructional videos that cover everything from replacing water heaters to installing shower faucets. Creative landscaping can increase the value of a property by 13 percent, according to a study by Virginia Tech University. The DIY Network has several ideas for easy landscaping projects that anybody with a little ambition can complete.

House flipping is a cyclical endeavor that is only profitable when economic conditions are positive. Now is a great time to get started.

Source: RealtyTimes Staff

http://realtytimes.com/consumeradvice/buyersadvice1/item/33435-20150311-house-flipping-a-beginners-guide-for-success

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