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What are the Types of Flipped Homes?

Looking to use the Fix and Flip model to enhance your income? Have you considered purchasing a property and then using that property to boost your monthly or yearly earnings? Often this is called Flipping a home. It is changing the state of a home from where you purchase it, enhancing it and then noting the increased value. How you decide on a property to purchase and flip is based on many factors. Consider location, the current state of the property, resale value, and what you would like to do with the property. Simply flipping a home is only part of the picture. What do you want to do once the property is repaired? You have many options. See below for some of the common approaches to fixing and flipping a real estate property.

Complete Rehabilitation. Some purchases are made because the land a home is on is incredibly valuable. Perhaps the home on the plot is in poor shape, or does not match the features of the neighborhood. Perhaps a complete rehabilitation would ensure you the most profit. In this case, keep in mind all the costs associated with a complete rehabilitation. You will be negotiating with contractors, need various permits, sourcing of materials will need to be considered, as well as what you want your final home product to look like. It is best to plan out as much as possible prior to entering into the financial contract. Have as many assessments completed as possible, conduct your own research of the neighboring areas, ask people who live in the area about the history of the location as well as the intended future of the community and housing prices. It can be incredibly valuable to collect information prior to entering a purchase.

Remodel. Fixing and flipping can seem like a straightforward concept. Find a home that needs some help. Fix it up. Make a bunch of money. But it takes a lot to find the right home. You must find the ideal location, a property that needs some repair, securing a proper price that will allow you to make a profit, setting up the right financing, locating a contractor, decisions on what needs to be repaired, and a plan on how to maintain the property. In a traditional remodel situation, you may want to focus on a property that is below its market price if it were in top condition. Yet, selecting a property that needs serious repairs will likely not get you enough of a return on your investment. You also want to be careful to select a property where your improvements will yield a high return. If all you are making are cosmetic updates, the new selling price may not be much higher than the original. Focus on properties that will give you a good return on your investment when selling. Also, be sure to learn about the market in the area, what other homes in the area have been selling for and the features of neighboring properties before you enter any negotiations.

Buy and Hold. Some investors plan to purchase a home, sometimes a second property, all with the intention of holding onto the purchase. Then, they offer the property as a rental so they can collect extra income each month. This is a very appealing approach for many real estate investors. A location must be chosen carefully, with consideration of the purchase price and the ultimate asking price for rent. It should be high enough for you to make a profit, to be able to handle maintenance on the property and to pay appropriate taxes. But, be sure to reference the cost of rent in the area. Pricing yourself higher than average can make it difficult to find and keep paying tenants.

When deciding on a property to purchase keep in mind several additional costs that are rarely discussed. Some houses have HOAs. Property taxes vary across states and locations. The level of maintenance must match the neighboring properties. Insurance costs vary by state, company, and house. The value of landscaping differs across neighborhoods. Selling costs are variable, including closing costs, title insurance, home warranties and attorney fees. You must know the costs in the area for each of these tasks. Without doing thorough research before entering a deal, you could lose all your planned profits.

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