Buying A Home
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
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Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
flipping a house: have you? would you? if yes, what?
I'm wondering about flipping houses for fun and profit. Has anyone done it? if so, how did it go?
Any advice on what to look for in a purchase to be flipped? Do you think now is a bad time to mess around in real estate? If not now, when would you consider it? (what "signs" would you look for in the real estate markets before making a purchase for flipping?)
If you were going to flip, what sort of property would you buy?
Flipping.. what are you thoughts?
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Re: flipping a house: have you? would you? if yes, what?
DH flips single family, condos & multis. So far this year he has bought 6 houses. He usually averages 8-10 per year. The real estate market in our area right now is bad, so he has sold only 3 houses and the rest he has kept as rentals. Rental market is stronger and all properties are thankfully generating cash flow.
DH buys at foreclosure and lien auctions, so all property is "as is" and you cannot ask for an inspection with an auction property. Sometimes he cannot even get into properties to see them and there is a lot of risk. Would not suggest this for amateurs, but he has been doing this for over 20 years. Also the banks are holding on to a lot of foreclosures so prices are higher at auction and there is more competition. This would not be the time to jump into flipping when you have no experience and will have to compete against professional investors who have cash to pay for houses. They will bid you up and you will end up paying more for the house than you should. You can find foreclosures that don't sell at auction on the MLS, but you will pay higher prices once they go to MLS and your profit margin will be much lower.
While flipping houses may sound fun, believe me it is NOT! It is very stressful and you have to be prepared for the worse. You have to be prepared for overages on your budget so make sure you have extra cash on hand, contractors who may or may not show up and deadlines not being met. Fortunately most of the contractors we use are long time people and we don't usually have any issues. On a recent flip we had to find a new siding contractor and he went 2 months over deadline causing us to miss the spring real estate market. You also have to be prepared to sit on property in bad markets like this or rent them out. While DH has had numerous lucrative and very profitable years, this year is not one of them.
If you are looking at flipping as being "fun" as opposed to a serious business with risk, then you are definitely not ready to flip. Sorry just being honest.
We put an offer on a potential flip but didn't get it. There is a LOT to think about.
Don't forget about capital gains tax and realtor fees. If we had purchased a $75k house and put $50k into it (including mortgage for as long as you would have needed to hold it and taxes on the property), we would have been able to sell for ~$200k. Take that down by 5% for negotiations, sale price = $190k. 30% of profit would have gone to cap gains tax and 7% to our realtor, leaving us with:
(190 - 125)*.3 = ~20k
190*.07 = ~13.3k
Total profit: 190 - 125 - 20 - 13 = 32k
Make sure you get an amazing home inspection.
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And that would be an amazing deal that would be very difficult to come by. You also don't know what's going to happen with the economy, if things get worse would you be able to handle the carrying cost for an indefinite period of time?
I spent many years flippping houses, you make your money when you buy the house. You just make it easier to sell with the updates. I don't flip anymore and I used to make a lot of money. My current house was actually bought as a flip - I bought it in Feb 2008 and I'm still here...we put 20% down and I can't sell without bringing money to the table.
I do however "collect" rental properties. I buy them way under market value - I once got a 4 bed 2.5 bath townhouse for 12k - $3500 worth of work and condo fees of $125 per month. Water and cable included in condo fees and I rent it for $800. It's paid off and all of that money is reinvested into other properties.
I agree with a PP, this is not a game or anything to just have fun with. Investing in real estate can be very, very risky and you need to be careful. Being a landlord is also a huge PITA and I have to be a huge *** on many occassions. There are many renters that will take advantage of a landlord that doesn't know what they are doing. Trust me. I'm also a real estate agent (and my Dad is a broker), I know the law very well and I have an amazing real estate lawyer that I can go to if I need advice. I also deal with Section 8 housing - that's the best way to make money with rentals, but that puts you at risk for other problems.
Agree, DH fortunately is a broker (saves on commission side). We can also run our own credit checks and don't have to hire management company to do things, so that saves us a lot of money. We have a couple attorneys in the family who handle legal issues with tenants and real estate transactions. That said it is a PITA dealing with some of tenants. If you only have 1 or 2 rentals it is not so bad, but when this is your business and you have many, there is always something that comes up. Also agree about Section 8, you get the money but you also get more questionable applicants and some people who try to play the system. We have been lucky so far with the couple of Section 8 tenants we have but we are also very careful with screening process.
Wow. Thanks. There's some great information here. I was being a little well, flip (sorry, bad pun) about flipping for 'fun and profit' - I'm aware that it's hard, hard work.
My family's business is real estate, with a focus on apartment buildings. I grew up with parents who would buy and sometimes sell them, my father's a broker as well as an owner. Although my parents are now in their 70s, they're still deep into real estate development. They're in the final construction/selling phase of a high-end condo conversion project and their plan is to unload some of the proceeds on me sometime in the next 10-14 months.
They want us to start investing in real estate and I'm trying to figure out what might be a good fit for me and my family. Flipping is one possibility, as is buying and renovating rentals or a small-ish apartment building. I have some experience with many aspects of the business (I worked for my dad while in college), and some resources, but am still a relative beginner.
We live in a college town, where rentals are relatively expensive and there is an endless supply of students and tenants (many of whom will happily rent a 4+ bedroom home with friends. We also have significant building constraints - ithe town prides itself on being green, on community participation, and on a whole bunch of other things that limit construction, especially of multi-family rental property. On the plus side, public transportation is free and frequent so students can and do live all over the community.
Given that, what would you suggest as an investment/business plan for someone who wants to get started, has access to some resources and some knowledge, but would be a relative newcomer to the area. Flip? buy rental houses? or just stick to apartment buildings? Or is there something else I haven't considered yet?
Thank you. The previous posters all provided some great information and I appreciate it!