Fix and flipping homes can be a very profitable business, provided you do your homework right and know what you are doing. If you fail to do this, then you may end up with a lot of losses. Fix and flipping homes can seem like a simple concept, but the truth is that it is not. You will buy a house that needs some rehabbing, fix it up, and sell it for a profit. The reasons why the process is not as simple as it seems is because it will take time and effort to find the right deal, the right contractor, the right financing, value a property, maintain a property, making sure that all the repairs have been done, and then selling the home.
Fix flipping real estate is not something you can do for a couple of hours per week and succeed. You will have to invest time and effort in the venture. If you don’t invest time, then you may end up turning a nice profit into a big loss. Fix flipping real estate is not an easy side job that will make you a fortune while you continue to work at your day job.
The profit that can be made will vary, depending on the cost of buying, costs of selling, and expenses. If you want to know if you are making the right profit, network with other investors and compare the profits you make from flipping. There are a couple of times you may find you make up to six figure profits, but that will only come once in a while.
There are some costs that you must expect when fix flipping real estate. Knowing this will enable you to know the selling price of your property and what you can make from the sale. These expenses vary depending on the value of the home and the location. For a flip that costs $100,000, you can expect the expenses to be between $15,000 and $40,000. These includes purchase/loan costs $2,000 – $8,000, Insurance, HOA, property taxes, Maintenance cost, and selling costs.
Financing a fix and flip is expensive and many investors do not have cash. There are some investors who can pay for a property or two, but most of them need to borrow money. Hard money, such as that obtained from hard money lenders California is a common way to finance the flips, but can cost you four points and an upfront interest of up to 15%.
Every flip has its own costs. There are some houses that have HOAs and some don’t. The property taxes will differ from state to state. The amount you pay for the insurance varies too. What you spend on the maintenance will be different depending on the location.
One misconception that many people have is that the flip can be done with a short time. You will be surprised to know that it can take professionals up to six months or longer to flip it once they buy it. Lining up the contractor will take weeks, a month to finish the repairs, a month to find a buyer, and another month to close the deal.