Medusa

Flipping Houses: What You Need To Know

<p style&equals;"text-align&colon; justify">Buy a house&comma; fix it up&comma; sell it for a profit — that sounds easy enough&period; But people who think they can make a lot of money by &OpenCurlyDoubleQuote;flipping” houses may be in for a surprise&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify">In order to be successful at the house-flipping game&comma; you need to have a lot of capital to invest&comma; understand the real estate market and be able to perform improvements yourself&period; Without the right combination of skills and knowledge&comma; you could end up with nothing more than a rundown property and another mortgage to pay&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify"><img class&equals;"aligncenter size-full wp-image-9073" alt&equals;"Flipping Houses&colon; What You Need To Know" src&equals;"https&colon;&sol;&sol;medusamagazine&period;com&sol;wp-content&sol;uploads&sol;2013&sol;11&sol;468256083&lowbar;783d1e5816&period;jpg" width&equals;"500" height&equals;"375" &sol;><&sol;p>&NewLine;<p style&equals;"text-align&colon; justify">If you’re thinking about flipping a house for profit&comma; read on to learn more about what it takes to be successful<&sol;p>&NewLine;<h2 style&equals;"text-align&colon; justify"><strong>Understanding the Numbers<&sol;strong><&sol;h2>&NewLine;<p style&equals;"text-align&colon; justify">House-flipping is a calculated risk — you’re betting that you’ll be able to recoup the money you spent on improvements when the home sells&period; But it’s easy to let optimism cloud your view of reality&comma; so you need to bring in a real estate agent to project what the After Repair Value &lpar;ARV&rpar; will be for a property&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify">After a real estate agent has given you a price the home will likely fetch after improvements&comma; you can determine the maximum amount you should spend to purchase a fixer-upper&colon; Multiply the ARV by 70 percent&comma; then subtract the cost of improvements from that figure&period; The resulting number is the most you should spend on a property&period; Remember&comma; you’ll have to pay for closing costs&comma; insurance&comma; utilities and other incidental costs along the way&comma; so let math — not your instincts — be your guide&period;<&sol;p>&NewLine;<h2 style&equals;"text-align&colon; justify"><strong>Who will handle Repairs&quest;<&sol;strong><&sol;h2>&NewLine;<p style&equals;"text-align&colon; justify">Maybe you’ve got a workshop full of power tools — and if so&comma; that’s great&comma; because you’ll be able to do some of the home improvement work yourself&period; But you’re still going to need a professional inspection and advice from a general contractor about what repairs are essential&comma; and how much they might cost&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify">You won’t be able to fix everything yourself&comma; at least not within a reasonable timeframe&period; So&comma; who’s going to help you&quest; Will you have to pay someone to update plumbing or wiring&quest; Will you have to pay for a new furnace&comma; new roof or new water heater&quest; Don’t assume that you can flip a house by making cosmetic changes&period; If you found a home for sale at a rock-bottom price&comma; that likely means it’s in need of major work&period;<&sol;p>&NewLine;<h2 style&equals;"text-align&colon; justify"><strong>Do you understand Applicable Laws and Regulations&quest;<&sol;strong><&sol;h2>&NewLine;<p style&equals;"text-align&colon; justify">If you take out a mortgage to buy your fixer-upper&comma; you could be hit with a pre-payment penalty if you repay your loan too quickly&period; Instead&comma; aim for a home that you can afford to pay cash for&comma; so you can avoid the problems that may accompany a short-term mortgage&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify">You should plan to keep any property you’re renovating for at least three months&comma; because if you buy and sell a home in less than 90 days&comma; it’s ineligible for Federal Housing Administration mortgage insurance&period; Also&comma; if you make flipping homes your occupation&comma; the IRS is going to tax your profits like income&comma; which can be quite a shock to unsuspecting house-flippers&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify">Flipping homes may be a way for handy people to make some extra money&comma; but in general&comma; it’s not an occupation that will make you rich&period; Because of the many risks involved with buying fixer-uppers&comma; make sure you know what you’re doing before taking the plunge&period;<&sol;p>&NewLine;<p style&equals;"text-align&colon; justify">Image credit<&sol;p>&NewLine;

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