Tips For A Successful House Flip

Successful House Flip

Do You Think You Could Be a Successful House Flipper?

Thanks to HGTV, house flipping is an increasingly popular method of real estate investing. As easy as it may look, however, flipping is far from easy.

A seasoned house flipper admits, “We make it look easy,” she said. “But it’s risky, back-breaking work. It can be fun, but if you don’t know what you’re doing, you’re sunk.” You need plenty of cash and nerves of steel to get into house flipping.

To begin with, you need excellent credit score, cash for down payment, and you need to know the real estate market. Here are some tips that will help you join in on the house flipping fun!

Calculate The Numbers

When first learning about flipping houses for profit, knowing how much the investment is going to cost is key. You need to know how much of your own money you have to invest, or whether you’ll need to find a partner or investors. You need to know your purchase price range, closing costs, insurance, taxes, and repair estimates. When it is time to sell, there are more numbers you will need to be aware of: your commission, days on the market, holding costs, and estimated property value. It is important to be comfortable with all of the numbers before you proceed.

Start Building Your Team

As soon as you finalize your purchase, the next step is to start building a team to make the flip a reality. A team should consist of real estate brokers, architects, contractors, accountants and lenders.
This team will help you find, fix, and flip the property. The experience and expertise will help you make a successful flip. It is impossible to do everything on your own. Enlisting your own group of talent will not only help you be more productive, but will help you work through the inevitable problems and challenges that comes with a flip.

Find A Potential Home

Although you can search online and see countless foreclosed homes for sale, never buy a home sight unseen.

Always personally investigate a property before making the decision to buy. Keep in mind, the online photos only tell part of the story. Out of date photos, awful neighborhoods, black mold, and rotted wood are just a few of the possible problems hidden on online listings.
It is important to consider the school district, location of the home, and making sure the home is in sound condition. All of these items will result in higher potential profits.

Tight Management

Once you purchase the house, you will need to personally oversee the operation. It is counterproductive to rely on your contractor to handle and supervise all the repairs. Make sure you manage this process tightly to ensure that your plan is being carried out properly and on budget.
In the end, your profit largely depends on the initial purchase price and keeping your repair cost within your budget.

Race The Clock

House flips average six months from purchase to sale, but it is wise to factor in a few additional months of expenses to ensure a profit.

Time is of the essence when flipping houses for profit. It’s a race against the clock because the longer the rehab takes or the longer the house sits on the market after completion, the less profitable the flip.

More time means less money. Costs such as financing payments, insurance payments, town taxes, utilities and other miscellaneous carrying costs, all which have to be paid at regular intervals.

Determine Sales Price

One common mistake that is often made, is thinking the property is worth more than it is. Even if you hit it out of the park, and the house looks amazing, it doesn’t mean it is worth more than other comparable homes in the area. Your real estate agent will be able to counsel you to determine a competitive listing price.

A house flipper must be prepared for the possibility that the home won’t sell right away. If you can handle the roller coaster of the flip process, you have an enthusiasm of transformation, plus you are up for some hard work, then house flipping might be right for you.

Find Your Next Flip

Colleen at CLA Realty can help you find you next flip. Contact her at CLARealty.net or give her a call at (928) 662-9200.

Newlywed’s Guide To Buying a Home

Buying your first home

An exciting step for newlyweds is purchasing their first home as a married couple.  Planning a wedding is most often a stressful event in a new couple’s life.  Purchasing a home can be stressful as well, but with advanced planning, the stress can be lessened, leaving memories of a successful purchase.

Below are some tips to make buying your first home a smooth and positive experience.

Make Financial Goals

The first thing you want to talk about is your financial goals as a couple. Are you both spenders or savers? Do you want to have a joint retirement savings or keep them separate? Identifying these factors is a crucial first step before you walk down the aisle or across the threshold of your first home together.

Set Expectations

Just as there are numerous towns and subdivisions that you can choose to call home, there are equally number of styles of homes, amenities, and ‘must haves’ that need to be determined before you begin the home search.  Make a list of ‘Must Have’, ‘Negotiable Items’, and ‘Can’t Have’ about your future home and discuss them with each other.

Make a Plan

A spending plan or a budget is a vital step in planning for a new home purchase. Think of it as a financial road map that will get you through starting your lives together.  This spending plan will be a valuable tool while finding a home. You will want to take into account all the money coming in and all the money you have set aside. Compare those numbers with financial goals you previously discussed– how much do you want to have left over when it is all said and done? Those numbers will help you establish a spending cap for your new home.

There are several on-line budgeting tools available.  Dave Ramsey has an easy on-line budgeting tool available for free at DaveRamsey.com.  Be complete and accurate with your numbers.  Try living on the budget for a few months before signing on a new home.  This will allow you to work out the bugs and ensure that you are in the right price range when purchasing a home.

Items to Consider to Qualify for a Home

Credit Scores

While new couples have formed a joint union, their credit scores haven’t. The scores are determined individually, but both scores will count toward qualifying for a loan, if both incomes are needed because of the amount of the mortgage. The mortgage interest rate depends on the credit score as well as the type of mortgage and the length of time. The first step is to obtain your credit report/scores, and review the reports for any errors. If the scores are less than you hoped, raising scores a hundred or so points in six months is achievable.

Pay Down Debt

Not only will your credit score be considered, but also your total debt level and debt-to-income ratio. Tightening your belts and get rid of as much debt as you can will help you qualify for your new home. It is advised to NOT close the accounts after paying off debt. A factor in your credit score is your used debt compared to available debt. If you close an account, you’ll decrease your available debt total.

Save for Down Payment

Expect to pay a 20 percent down payment. If your credit score is at the border of going from mediocre to good, a larger down payment might persuade the lender to not only approve the loan but give you a lower interest rate.  There are Government Grants available for first time home buyers, read more about it at BankRate.com.

Increase Gross Income

How much house you can afford depends on how much you can pay every month. Most lenders prefer that you keep that figure at no more than 28 percent of your gross income. For example, if your household income is $4,000 a month before taxes, then your ideal maximum house payment would be $1,120 (which is roughly a $220,000 home at 5% interest rate). If you make $6,000, you can afford up to a $1,680 monthly payment. Goals could include getting a new job at a higher salary level from six to 12 months before you apply for the mortgage, getting a promotion at work, working overtime, going from part-time to full-time work, or possibly getting a second job.

Making the decision to purchase a home as newlyweds is an exciting event, for more information on purchasing a new home, contact the CLA Realty Team.

A 1031 Exchange is a Powerful Tax Strategy

A 1031 Exchange is a powerful tax-deferment strategy used by some of the most financially successful investors to defer taxes1031 Tax Exchange when selling investment/commercial property.  This effective strategy is also known as a “Starker Exchange”, named for the first tax case that allowed the exchange, or a “Like Kind Exchange”, referring to the type of change that occurs.  This tax-efficient way of preserving capital that is invested in real estate is appropriately named a 1031 Exchange, after Section 1031 of the IRS code.

Section 1031 of the Internal Revenue Code provides an exception that allows the deferment of payments of capital gains taxes when a business or investment property is sold, if the reinvestment of the proceeds is reinvested in a similar property through a like-kind exchange.  To put it simply, a 1031 exchange allows an investor to “defer” paying capital gains taxes on an investment property when it is sold, as long another “like-kind property” is purchased with the profit gained by the sale of the first property.  An investor will eventually cash out and pay taxes, but in the meantime, Section 1031 allows an investor to trade properties without incurring a sudden tax obligation. Continue reading

Crowdfunding Your Real Estate Purchase

Real Estate has historically generated 9.6%+ returns with less volatility than the stock market. Unfortunately, since real estate Crowdfunding Your Real estate purchaseis typically expensive, ordinary investors have been left out of enjoying these profits.

Have you ever considered crowdfunding your real estate purchase?  Crowdfunding may be a term you don’t recognize.  Crowdfunding is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the internet.

Crowdfunding has become something of a buzzword among investors, and it’s been particularly well received in the real estate sector. Though it is still relatively new, real estate crowdfunding is rapidly reshaping the way individuals find and invest in properties.

We live in a world of new technologies, a place where things that once seemed impossible are now considered the norm. Uber, Amazon, Airbnb and many others have completely changed the way people buy and sell goods and services. A Gofundme campaign, which is a form of crowdfunding, can be set up in minutes to get you to go visit faraway places, buy a new toy, help out a friend in need, or support a great cause.

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