How to Finance Flipping Houses

House flipping involves purchasing a home with the intent to generate income, after the rehabilitation of the building. Television shows have recently caught wind of the trend; which has resulted in an onslaught of house flipping programs. The trend leads to a glamorization of the process. While flipping a house seems like a way to get rich quick, new flippers can get derailed while attempting to finance the flip.

Suggestions

1. Seek a business partner to invest with you. Place an advertisement in the classifieds, and speak with your friends, to see if anyone wants to partner-up. Choose someone you trust, as you don't want to end up losing. Gather a small group of partners, if possible. More people generates more financing, but it also means more people to reap the rewards.
2. Apply for a bank loan. Bring accurate income statements and information on all of your equity investments -- including stocks and other property -- to the bank, when you apply. The bank wants to give you a loan, but you must prove you can pay it back. It is likely that the bank will only finance 75 to 80 percent of the value of the home. You still need to prove to the bank that you have access to the downpayment.
3. Approach private lenders for quick cash loans. Private lenders often offer significant amounts of cash, but expect the return quickly. The interest rate is often quite high, especially in relation to conventional bank loans. Explore this option only if you can quickly rehabilitate the home and make a speedy sale. You may also try a private loan from a close friend or family member.
4. Obtain a second mortgage on your current home. Depending on the price of your home, and the one you wish to flip, a second mortgage can provide the funds for a downpayment, or the entire purchase priceRehabilitate the house on your own. Save money, by not hiring out for things like plumbing, electrical and paint. Ask friends for voluntary assistance, and take classes at community centers, to learn tricks of the trades.
5. Used restoration materials as often as possible, rather than purchasing new items. Save money where you can during the project to fund the actual home purchase, until the flip is complete.

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How to Get Started Flipping Houses

There are several ways to make money in real estate. One of those ways is to flip houses. This is when you purchase a home in need of repair, fix it up, and sell it for a profit. Flipping houses can be very profitable, but only if you know what you are doing. If you do the research, have the credit, and the time, then you can make a profit flipping houses.

Suggestions

1. Take a look at your budget to see if you have the assets to flip a house. You don't necessarily have to have cash to do the flip, but you will need to have a good credit score to receive the financing needed to buy the house you want to flip as well as the money needed for the repairs.
2. Find a real estate agent you can work with. This agent will be able to keep an eye out for houses that are priced low because they need some repair. The agent can see them on the MLS as soon as they are listed and give you the heads up.
3. Look for a house that is priced low that just needs cosmetic work for your first flip. You need to slowly gain experience, and this is a great way to get started. You won't get rich overnight, but you will learn valuable lessons that will help you make big money with flips later on.
4. Take a contractor that you trust with you to look at the house. Together, come up with a timeline in which the house could be completed. This should be done before you put in an offer on the house. If the contractor tells you it will take six months to complete and you can't afford to hold the mortgage that long, then you will know this deal isn't for you.
5. Make an offer on the home. Your real estate agent can help you decide whether to offer full price or come in a little lower.
6. Get your permits as soon as your sale is final. If you don't get your permits ahead of time, the county could shut you down in the middle of your flip. This will cost you extra money in labor as well as costing you in time. The longer it takes, the more mortgage payments you have to make, which decreases your profit.
7. Focus on fixing up the bathrooms and kitchens. Make them the way a buyer would like them. They should look clean and modern. These are the rooms that really make or break a sale.
8. Spruce up the yard. You need to make the outside look inviting to buyers. If they drive by and don't like the look, then they won't even stop and come inside. It is worth it to hire a landscaper to do a little yard work to get ready for your open house.
9. Appraise the house and put it up for sale. It is beneficial to hold an open house over a weekend, when many people are off from work. It is best if you let the real estate agent do this for you and then have him call you and tell you how it went.
10. Sell the house as quickly as possible to make the most profit. The longer you hold the property, the more profit you lose. You may not get asking price, but you should get enough to make a decent profit.
11. Reinvest the profit of your first flip in to a second house that might be a little bit more work.

Tips

• Make sure you have the time to keep an eye on the contractors, plumbers, electricians, and painters, as many flippers have caught them slacking off or not showing up when they were suppose to.
• Get estimates for all of the repair work ahead of time so you can make sure you have enough financing to cover the costs. You are going to lose money if you end up not being able to complete the repairs.

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How to Start a House Flipping Business

For many years, real estate has been a popular investment. While most people simply choose to purchase a home and live in it as it increases in value, some individuals participate in house flipping. They seek out properties that need repairs or are outdated, which they can purchase for a low price. After they've purchase the house, they make the repairs and updates before selling it. If done correctly, this yields investors a profit that can then be used to flip more homes. You too can make an investment in real estate and start a house-flipping business.

Suggestions

1. Learn about the costs involved. To be successful at house flipping you must be able to make a profit. It's important that you know the costs of homes in your area based on size, amenities and location. You also must know what common repair and remodeling projects cost, as you'll need to figure these in when determining whether a flip will turn a profit.
2. Find funding to start your business. Starting a house-flipping business can be costly depending upon the price of the first home you flip. You'll need to get a loan for the home you purchase as well as have money to make the needed repairs. Some lenders won't provide loans to people purchasing a home as a business investment rather than their residence, so you may need to seek out multiple lenders before you can find one that will qualify you for a loan.
3. Find a property to flip. Once you have secured the money for the home as well as the remodeling, you can find a house to flip. Find a house that has potential to sell for a higher dollar amount if cosmetic changes are made, and then compare the cost of the home and the repairs to the price at which you could sell it in the end.
4. Network with subcontractors. When flipping homes as a business, the majority of work often done to houses are completed by subcontractors especially if they involve specific trades such as plumbing or electricity. You want to get to know subcontractors in the beginning to ensure that you find ones who you can trust and who do good work at a fair price.
5. Obtain the appropriate licenses and permits. Some states and local governments require house-flipping businesses to be licensed since they are responsible for construction in residences much like a general contractor. While these licenses aren't always required, you must get building and construction permits prior to starting work on houses that you're flipping.

Tip

• You might be able to get a discount on certain items you use to flip a house such as tiling, cabinets, etc. if you purchase a bulk order and use them in multiple homes you flip. It's important that you are organized when operating a house-flipping business since there are large amounts of paperwork involved in the purchasing and selling of houses as well as many expenses you have flipping them. If you don't plan to be present at the house you are flipping each day, you might need to hire a general contractor to make sure subcontractors stay on task and work gets done on time.

 

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