How to Choose Good Houses to Profit from Flipping
My brother has been buying, renovating and selling houses for almost 20 years here in Ontario. He began when an accident left him with a small nest egg, after lawyer and court costs. But it was something for a young man to get started in real estate buying. Luckily, he already had some connections and some second hand experience on his side. Our Mother had gotten her start in real estate a couple of years before.
The first property was one he bought jointly. He was the one doing the work, or contracting it out. Along the way he learned a lot and then a lot more. If you have no experience in real estate, house building, property management or at least home inspections, you will be surprised at how much there is involved with buying, renovating and selling a property.
There are even differences in different towns, cities, counties and of course provinces (states) and countries. If you are just starting out, thinking this is a good way to invest your own funds from a pension, or something else, do your research on the local level.
Don't Buy If...
If a house shows signs of trouble with -
don't think you can buy and sell and still make good money on it. Chances are too good it will become a money pit. Even if you have friends do the work, get your materials at cost and get lucky with everything else... is it really worth going through all of that just to break even, more or less.
Structural Versus Cosmetic
The house you buy can have all kinds of cosmetic problems and still be a good choice. Cosmetic fixer uppers would be structurally sound. If the only thing you really need to fix is the street appeal of a house you are not only lucky, but you found a pretty great deal if the house is priced low for the area it's located in.
Structural problems can include anything from the foundation up to the roof. Structural problems are going to cost you money, usually a lot of it by the time you get the house done. Don't forget to figure in costs for paperwork like permits and having someone come and approve your work for building codes. Also, anything to do with the water and electric will likely need a city inspector coming out. Structure problems are expensive, detailed and take more time to finish before you can consider putting the house on the market.
Also, you must consider the cost of the original house price, factor in the money you will be putting into it and then the amount you will actually hope to get for the resale. If the math doesn't work out in your favour, don't buy the house in the first place.
Watch for Dirty Disasters
Houses which are very dirty can be cleaned up. But, find out about the history of the house. Was it owned by a hoarder, was it a rental property for a long time or was something criminal going on there? Dirt can hide a troubled past which could mean the house won't sell should your real estate person and the perspective buyers look into it.
Also, a house in distress is likely to have structural problems. They certainly are a bigger risk than a house just neglected, a little dumpy or in need of updating.
Things to Check Into Before you Buy
Be aware of market conditions in the area. Are houses selling? There is no point in buying in an area where the real estate market is stagnant.
Look into the financial aspect. Does the house have messy finances from the current owners? Are there liens on the property? Are there any legal disputes involving the house and/or property? What are you getting into if you become the next owner?
If the house is currently rented - have the tenants been notified to move? Do they have a lease? Is that going to be a messy situation you will be left with once the house is in your possession?
Does the house have construction materials which are going to require extra expense to remove and then dispose of - all at your own expense? Think asbestos as an example.
Check with the city - in rural areas a house may be in an area which is being converted from well water to city water (for example). This is a big expense which could be the reason the current owners are trying to sell the house, before the deadline for paying for the change over.
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