How to Flip a New House

by Matt, Zack, Sondra C, Tom Viren and 17 others

house-flipping-kelowna

 

There’s an incredible amount of money to be made in flipping homes. In fact, if you play your cards right you can easily make $50,000 or more per flip, and do it in under 90 days. So if you want to make some enormous cash, with very little work, here’s a practical and real way to do it.

 

Steps

1.First, you should familiarize yourself with how to buy a home or condo. If you’ve already done that, then you already know the process and it’s second nature.

  • If you have never purchased a home, then consult with a realtor. There’s a few steps involved when purchasing a home so you need understand that process, such as: placing an offer, getting a mortgage, removing conditions and taking possession.

2.Next, familiarize yourself with the market conditions in your area.

  • This is especially helpful because the housing market is like the stock market in that it has both “bull” and “bear” cycles. The difference is that the housing market can take years and years to switch from one cycle to another. All that simply means is real estate might either be in “high demand” or “low demand”. After talking to at least 3 realtors and doing some investigation, if you find that the market is in low demand and everyone and their dog seems to be trying to liquidate their homes, these kinds of market conditions would make it more challenging to flip a home, but it can still be done. Only though for less profit. The idea cycle is like “right now”, it’s been “bullish” or “high demand” since at least the year 2000. It’s 2006 now and things are at an all time high. Extremely good conditions for doing flips. So if the market conditions are right then you can be confident to start looking for a property.

3.Find a property.

    • Some people look for distressed properties. These are ones that the seller is “desperate to sell”, for reasons such as divorce, bankruptcy, death, poor condition of the property, late on payments, etc. That is one type of house to look for. Definitely keep your eye out for those kinds of distressed properties.
    • However, another way is to simply locate the areas of your city or town that are “new neighborhoods”, where all the new construction is going on. Go there, and drive around. Look for signs placed by builders who want to sell their new home. Often these homes are under construction. They only have the frame up or something, but will be ready in a few months time.
    • Another way is simply by looking up a list of builders in your area. Call them all up and ask them if they have any “spec homes” for sale. That’s what a new home with no actual owner is called (other than the builder). The reason you want to consider finding a brand new home is simple. It’s brand new, there are no renovations needed. It shows way better and you’ll get more people coming to see it than you would an older home. And the margins are bigger. That means new homes command a “premium”. If a person wants to live in a brand new home, they have to pay a higher price tag. Almost like buying a new car off the lot, only that it’s not going to depreciate. Also, there are tons of other advantages: The new neighborhoods generally offer more features and amenities such as parks, creeks, walking trails, etc. They’re nicer with more upgrades. Your home is surrounded by nice new homes. All these features combined add up and make it easier to flip your home.
    • Again, do not discount older homes, or distressed properties. The key is to “find a deal.” Find a home the owner is selling cheap and leaving a lot of money “on the table.” This is your opportunity to buy it and flip it for that money!
  • Try to look for homes that sell in the middle to upper range. What that means is the amount where the average family would be able to afford it. Generally that means between about $200,000, and $500,000 depending on your area. You want that price range because these sell the fastest as theirs the largest population density looking for these mid range homes. It could be much less or much more but that’s about the average. The home must have: 3 or more bedrooms. It must have at least 2 full bathrooms.
  • In time you’ll narrow down your search to a few homes. At this point do some research on each builder, to make sure they are reputable, and will finish the home according to the standards that they claim, such as granite counter tops, 50 ounce carpet and other specs. Make sure they do quality work and even inspect some of their other homes they’ve built. If they have no other homes built to show you, then be very careful.

4.Once you find a home that’s a great deal. Knowing based on actual mls comparisons in that area that you could flip it for at least $50,000 more then, move fast! Immediately make an offer. If it’s accepted then, that will still give you time to do your research on the builder, and other homes available.

  • In the offer, be sure to have multiple ways out of the contract, such as “subject to financing”. Do not lock in just in case if you have a problem and need to get out, then you won’t be stuck. I had it happen once where I locked in, then had a problem getting the mortgage and I could have been just sank! But lucky enough I got a mortgage in time days after I was suppose to take possession. So don’t let that happen to you. Have multiple ways out of the contract. The most common is simply “subject to financing by x date”. If you can’t make the financing by then ask for an extension on the condition date.

5.Now, let’s say you got the financing, and you remove conditions on the home. That means you have to take possession the date of the contract. This is happening as you’re home is being built. So now you can talk to the builder and choose your features, colors, etc… of the homes interior and exterior. If you have no experience with doing this, then find out if the builder has a professional who can consult with you.

  • Choose “all neutral colors” textures, paints, and materials, and finishings that would suit just about any taste. Do not choose bright colors for anything. Remember you are “flipping” this home. Your making the interior for “someone else”. It’s not what you like, it’s what the general population will like, which is “neutral tones” on the inside and out.
  • Be sure to monitor the work of the builder as they finish the home according to your specs. Do not do too many upgrades to break your budget. Perhaps estimate a few thousand in upgrades at most. Especially things such as: lighting, crown moldings, ceilings. Do not do the entire home with just one type of flooring, other than perhaps an upper or lower floor. You might want to even consult other books or experts in finishing the home.

6.Now your home is ready, move into it, and make it ready for showing. Get rid of all your junk. This home is going to be up for sale. That means is has to be “100% clutter free”. A simple way to understand this is go to any “show home” in your area and see how they’ve done the interior. Your furniture doesn’t have to be as good or as fancy as they might have in the show home.

  • Hide all of your junk. Do not leave anything in plane sight. Put everything away in cupboards, closets, drawers, basement and garage. Leaving the main living area looking uncluttered. Do not use too much furniture either. You don’t want the rooms to look to busy. Also do not mount too many photos or picture on the walls. You want everything to be prestige. Because your buyer wants a “new home” don’t make it into a “used home” for them. Make it into a “show home” for them.

7.Now list the home. You must, I repeat “must” put it on the MLS with a realtor. Do not under any circumstance try to do a private sale. The reason is that there are thousands of realtors in your area who will see that MLS (multiple listing service) listing and begin showing your home maybe even “daily”. You’ll have tons of realtors competing to sell your home. Compare that to “just you” trying to sell it. Yes, you’ll give up a commission but that needs to be factored into the sale price.

  • List your home competitively with the area. However, when buying the 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 that you did. Don’t overprice it or it won’t sell, and don’t under price it and leave money on the table. But it’s better to under price it and just not be flexible on your asking price during the negotiation, than to overprice it and have nobody come look at it.

8.When you get an offer consider the situation carefully. Never under any circumstances get into a negotiation where your trading offers back and forth. If they give you an offer, you must always tell them, “I’ll think about it and get back to you in an hour”. Trust me, take some time to think about it. Do not start trading offers back and forth with a buyer without taking at least an hour. One thing you can do when you are with the buyer and they say “how about this much…”, tell them, “okay I’ll take that offer and I’ll go and have a coffee and I’ll be back in one hour to let you know”.

  • This is so important because chances are they have not offered you enough, and now you want to counter the offer. What you can do is take that hour to structure your counter offer. For example, if their offer is almost what you want but not quite, come back and say something like “okay, I’ll accept your offer but I’m not leaving the appliances”. They might be fine with that, and that makes up your $5000 that you would have stood to lose had you got into a hasty negotiation. So can you see why taking that hour is so incredibly important? Also always try to be the person to give the last “offer”. Unless that is, you are simply given your asking price, in which case there’s not much else to negotiate on.

9.The buyer of your home is going to want to be given a time frame to “remove conditions”. Generally if you have an offer the buyer will be “serious” about your home. If they need an extension only give it if there is little to no other activity. But if you’re still getting lots of other people and even back up offers, on your home, or perhaps feel like you’re not getting as good a deal as you initially thought, then don’t extend the condition date, which will make the offer null and void. That will allow you to take your back up offer which might be better and stronger. Generally though you want to be accommodating at this point to make the deal go through successfully. So if they want to bring their family by for the third time, just let them come see it.

10.Once the buyer has removed conditions you’re almost guaranteed that you’ve made your $50,000 or more. Some homes you can make much more. Some you might make less. Generally in my opinion I wouldn’t flip anything that I couldn’t make at least $50,000 net profit on. For you that number might be $25,000, which might seem like a fortune. But just remember theirs a lot of work on your part. Also there are hidden costs that you have to factor into the equation, such as appliances, landscaping, deck/patio, alarm system, blinds, realtors commissions, mortgage payout penalty, taxes and more. So that’s why I say be sure not to cut the margins to thin or you might not turn much of a profit after all is said and done. Also remember your home is going up in value each month, so chances are good that if you sit on it, your investment will go up, so be patient. The key is to just make sure you’re getting enough people coming to see the place. It’s a numbers game. If you can get a stream of at least 3 people per week coming to see it, chances are it will go relatively fast and in the price range where you stand to make perhaps $25,000, $50,000 or even $100,000.

11.Now that the buyer has removed conditions, you can start to begin looking for a new home to purchase or to try and find another home to flip the same way as you just did. You’ll need to find a home and move into it before the buyer of your home takes possession. Because on the day they take possession, you have to be “out”. Then shortly after they take possession, your lawyer will call you with a big fat pay check from the profit you made off the sale, that is unless you port that into the new home you end up buying. Generally best to leave those proceeds you make in your home. Don’t cash out and go spending the money. Better to compound the effect and allow your money to go to work for your in the next purchase, that to waste it on shopping items. Sure 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 another investment where it’s making you even more money. To me that’s the point of doing this. But everyone’s situation is different. Best of luck to you. I know it sounds like a lot of work, but trust me, it’s the easiest way to make this kind of money you’ll ever find. And when you consider that the average person works 8 hours a day 7 days a week all year long just to make $50,000k, here, you’ll make that perhaps working an hour a day for 90 days. It’s easy! And once you do it the first time it will become second nature. Also if you’ve already sold a home in the past then you already know the process. Good luck flipping!

http://www.wikihow.com/Flip-a-New-House

 

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