Assuming you’ve allowed for the down payment and six months worth of mortgage payments, you will be ready for the next step. If you want to make money with the flip, you will want to pick the best location for a house in your price range. A good realtor is worth his or her weight in gold when it comes to this. Pick someone that really knows the market even if that means offending a friend or family member. You can apologize to them later, or better yet, give them the option of supporting your family if the flip goes sour. That’s sure to get them off your case.

Once you’ve selected a realtor, know the price range of house you can afford, and found the house it’s time to do a serious evaluation of the house. In other words, what improvements need to be made, how long will it take to do them, and how much will it cost.

Assuming you’ve found a good location, remember one thing a filthy, dirty, stinking house with no curb appeal can be your best friend. (Curb appeal is how a house appears when you drive up to it.) These are all cheap and quick fixes, but they can devalue a house by as much as $30,000 or more. You’re looking for something that will give you a nice bottom line profit and you’re going to learn to love those cheap quick fixes.

Before you commit to buy the house, you should create a budget for the work. This is a very important part of your flip. Who’s going to do the work? Certainly not you, if you’re working full time. If you try, don’t call it a flip, call it a long term investment. Also not you if you don’t know what you’re doing. Yes, I know you’re smart and can learn, but do-overs are expensive, both in material and time. For instance, I knew a guy that tried to do his own plumbing. He ended up yanking out a shower when he discovered water from it running down the side of his house. If you use someone, other than yourself to do the work, make sure they know what they’re doing. Sometime, you can share in the profits in exchange for labor, but this is risky unless you really know the person well and know what skills they have. Also, how will that person support himself during the time required to do the work, particularly if the job takes longer than expected (and it usually does). You can end up in an unpleasant situation if your labor disappears in the middle of a project.

If you’ve been very careful in the selection of your house, it won’t need any major repairs such as a new roof, new electrical service, updated plumbing and so forth. If any repairs of this type are required, you’ll want to be sure you have the money for them and the selling price of the house gives you enough profit to allow for them. It makes no sense to buy a house for $200,000, spend $50,000 in repairs and sell it for $255,000. You call this a flip gone sour. By the time you figure your interest payments, closing costs, time, etc., you’ve lost money.

The next time we’ll take a closer look at the labor to do the remodeling.