Editor’s Note: This was originally published on RISMedia’s blog, Housecall. See what else is cookin’ now at blog.rismedia.com:
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Thanks to reality TV, you can see people buying houses and flipping them for profit on cable television and even your local public network. While some of these shows tell you how much the people spend on each segment, others show this process as a seamless task that can be completed with almost no troubles. Experts come in to demolish the site overnight and the host gets to shop for trendy, beautiful replacements. Almost like magic, a new house appears, a huge amount of money is earned and everyone walks away happy.
Experts know that this is not always the case. If you want to flip your home, you should definitely do some research to prevent wasting your time and money. The worst situation would be starting a flip without the proper knowledge and having to live in a partially destroyed structure. Here are some things to keep in mind before attempting to flip your home.
Money is made by buying low. If you buy a home for cheap, you get a larger amount at the end. The renovation costs are usually between 25-33 percent of the purchase price. When you factor that in, you might see that if you sell the home according to market value, you might not make much money. There are also carrying costs and other potential costs if things do not go according to plan. You might even have to consider potential losses to get a better idea.
Get an inspection. Foundation, pest, wood rot and many other problems could be waiting to happen in your home. Getting an inspection lets you know about these problems up front and can even help you know how to handle them. Inspections usually cost a few hundred dollars. Before signing the contract, make sure that you have the required seven-day time frame to have the inspection. If the inspection comes back with problems that you did not plan on paying for and they supersede your budget, you can safely get out of the contract with no penalties. You can even look in the fine print on your home warranty to find more details.
Let professionals do the job. It is not recommended that you do the job yourself. You can get a general contractor and several sub-contractors to get the job done in a fast and professional way. The faster the work is done, the faster you can get it onto the market and sold. When the property is completed, you can take the money and the extra time to look for the next deal. Real estate moguls make a lot of money this way. If you try to do it yourself, even if you have a background in construction, it could take significantly longer and you could lose out in the end.
Placing the property for sale 1-2 percent below market value can make it more attractive to buyers and move it off of the market sooner. Using a real estate agent is also very beneficial because you have someone actively working to get your house sold. Posting an ad on Zillow or Craigslist is also recommended to get attention from prospective buyers.
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