Flipping a House, How Do You Determine How Much to Charge?

Flipping houses can be lucrative if done correctly. The process begins with acquiring a house that, for whatever reason, can be bought at a relative discount and sold relatively quickly. The house may be a recent foreclosure in move-in condition, or it may be a fixer-upper in need of complete rehabilitation. Whatever the situation, determining a price that will produce a sale that yields a reasonable profit is essential to the entire transaction. Different investors have different profit requirements, so there is no one-size-fits-all markup. Researching market conditions and accurately estimating cost and setting a price that both you and your buyer can live with is solid advice for any aspiring rehabber or flipper.

 

1

Get material and labor estimates from contractors for any repairs or renovations you plan to make to the house. Calculate your own material cost estimates if you will be doing the work yourself.

2

Complete the repairs and renovations. Add your acquisition, carrying (interest on any rehab loans) and rehabilitation costs to determine your total investment in the property. Include commissions if you use a real estate agent to market your home.

3

Research the local market for homes similar to yours. Consider the square footage, amenities and location of homes that have sold recently. Hire a real estate appraiser if you want your home's exact value, or consult a real estate agent familiar with your neighborhood to get a ballpark figure.

4

Set a sales price comparable to recent sales.

 

Tip

• Setting a price above what you are willing to accept will give you room to lower your price to close a deal.
• Investors are typically a tougher sell than buyers looking for a house to live in; know your buyer and negotiate accordingly.

 

Wholesaling Real Estate Basics

Wholesaling real estate provides an opportunity for someone to build income with little capital or credit. All it requires is ambition and some specialized knowledge. The more ambition you have, the more money you will make. Wholesaling does not require a real estate license. A license is not required to buy or sell any property that you have an equitable interest in. That interest can be a contractual interest (you have the property under contract) or you actually own or have title to the property.

What is Wholesaling?

A wholesaler in a nut shell puts property (normally distressed property) under contract and assigns or resells the property to another investor. The investors a wholesaler sells to either use cash, lines of credit, or hard money loans. This allows quick closings on properties that sometimes need extensive repairs.
A wholesaler lives off of the idea that price overcomes all objections. If you can sell a property for a low enough price it doesn’t matter what’s wrong with it, somebody will buy it. A wholesaler focuses on developing two things. Finding deals and their network of investors to sell to.

Getting Started Wholesaling Real Estate

Getting started, a wholesaler should normally not ever buy a property. You put properties under contract with a contingency and focus on quickly selling the property for more money to other investors. If you end up not being able to sell the property before you are expected to close then you utilize your contingency and walk from the contract.
A wholesaler is a middle man, and a good wholesaler becomes a very well payed middleman that other investors love. The thing is that if you have a good enough deal under contract, there are other more established investors out there that will be glad to pay cash for it in a matter of days. If you have a house that will sell fixed up for $100,000, it needs $10,000 in remodeling, and you have a contract on it for $55,000, then with a developed investor network you could have an investor buyer for it for $60,000 in a matter of days. You sell it or assign the contract for 60K, you bought it for 55K so you just made $5,000 in a matter of days.

Calculating Your Homes Value

The fair market value of your home may not be the price you paid for it. The value of a house changes with age, remodeling and the local housing market, and as the neighborhood around it changes. Knowing the value can be an important factor when dividing up an inheritance, assigning property after a divorce or pricing your house when you put it on the market. You can figure out what your home is worth without hiring an appraiser to do it.

1

Gather information on comparable sales from the past six months. Comparable sales are houses similar to yours that have roughly the same square footage and number of bedrooms and bathrooms, and are located in your neighborhood or a similar area. The easiest way to do this is to work with a real-estate agent who has access to sales information online. You can also browse real-estate ads or drive through your neighborhood and talk to anyone who's sold their home recently.

2

Weed out prices that don't really represent your market. If one house is on a busy highway while yours is in a quiet cul-de-sac, that's not a good comparison. Also, houses that sold very quickly after being listed, or that sat for a year before selling, may not be good comparisons either: Long or short times on the market indicate the seller priced the house either too low or too high.

3

Total up the remaining sale prices, then divide by the number of sales. That will give you the average sale price for a house comparable to yours. To be a real measure of fair market value, you need at least three to five comparable homes.

4

Make adjustments for significant differences between your house and the others. For example, if the average sale price was $225,000, but you've just spent $15,000 remodeling your kitchen, you should set your home's value at $240,000.

Tips

• Your local tax assessor's office can provide you with information on assessed values for comparable properties. However, assessed values are frequently adjusted by deductions and exemptions: If an identical house to yours is valued at $50,000 less, that may not mean the assessor made an error.
• The property market can change quickly, so the more recent the comparable sales, the more likely your calculations will lead to a realistic result.

Warnings

• If your house is up for sale, the mortgage lender will insist on a professional appraiser calculating the value. If the appraisal comes in low, however, your information may persuade the appraiser to re-evaluate his figures.
• Do not use "for sale" prices when figuring comparable value. Just because a house like yours has an asking price of $300,000 doesn't mean that's what it will sell for.

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Tips for buying a house

1. Don't buy if you can't stay put.

If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it's an even worse proposition.

2. Start by shoring up your credit.

Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.

3. Aim for a home you can really afford.

The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.

4. If you can't put down the usual 20 percent, you may still qualify for a loan.

There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a small down payment.

5. Buy in a district with good schools.

In most areas, this advice applies even if you don't have school-age children. Reason: When it comes time to sell, you'll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.

6. Get professional help.

Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.

7. Choose carefully between points and rate.

When picking a mortgage, you usually have the option of paying additional points -- a portion of the interest that you pay at closing -- in exchange for a lower interest rate. If you stay in the house for a long time -- say three to five years or more -- it's usually a better deal to take the points. The lower interest rate will save you more in the long run.

8. Before house hunting, get pre-approved.

Getting pre-approved will you save yourself the grief of looking at houses you can't afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.

9. Do your homework before bidding.

Your opening bid should be based on the sales trend of similar homes in the neighborhood. So before making it, consider sales of similar homes in the last three months. If homes have recently sold at 5 percent less than the asking price, you should make a bid that's about eight to 10 percent lower than what the seller is asking.

10. Hire a home inspector.

Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house is worth the price you've agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.

We are always rehabbing and making homes look brand new.
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Renovate your kitchen on a budget before you sell

Before you get started, questions to ask:

• What is my kitchen's location? If it's facing south, east or west, you can choose a darker color. But if it's facing north, always keep it light to make the kitchen look larger
• How big do I want my kitchen be? How will I use the space?
• What work can I do and what work should someone else do?
• Am I a handyman?

Plan smart

• Most of the savings is in the planning
• Don't move the stove or the sink to a different location. Moving gas, plumbing and drain lines is very expensive (It costs about $2000 to move a sink)
• Plan your lighting ahead of time. Upgrade your lighting at the same time you're doing the electrical. If not, you'll have to bring the electrician back costing you a lot more
• Most kitchen cabinet stores will lay out your kitchen for free and Home Depot will charge a $100 measure fee (this fee is deducted/applied to the cost of the installation project if a customer decides to purchase installation through Home Depot).
• Bring a kitchen sketch with your sink, stove and window locations marked

You can figure out your labor cost by multiplying your material cost by 1.5 3. Here are the big expenses in renovating a kitchen The average kitchen renovation costs between $15-20,000 without the appliances. If you make the right improvements, you can expect an 80-90% return on your investment. The single best improvement that makes back the most money is putting a window in your kitchen. A window costs about $1000, and a French door costs about $3000. You'll get double your money back.

Tips for handling appliance

• The big status appliances still are Subzero, Viking, Miele
• Today everybody's making expensive looking stainless steel appliances that can fool even the most expert eyes
• Do perfect Mealy knockoffs with Whirlpool and Frigidaire
• If you shop around for appliances, you can even buy open box, slightly scratched appliances for 40-60% off and they still come with the full warranties and will sometimes give you an extra year warranty if you ask
• Buy a gas stove, nobody wants to cook on an electric stove

Cabinets

• You can reface your old wooden cabinets by sanding them down to the bare wood and applying polyurethane or staining them an entirely different color
• If you must replace your cabinets, install particle board cabinet boxes and solid wood fronts
• Not putting in hardwood will bring the cost down from $400 to $200 each

Countertops

• Granite and Corian are most popular; they look expensive and are expensive, but if you put in inexpensive tile on the backsplash instead, you'll save 30% (and you can pick a color to match your floor or cabinets)
• If you must use Formica, it's looking better these days. They now produce a 45 degree edge which makes the cabinet fronts appear rounded

Electrical

• Don't skimp on electric, it has to be done right. You'll need to install one dedicated circuit for each appliance and two more for your outlets. If you don't, when your refrigerator kicks on, your toaster will blow out.

Flooring

• Ceramic and wood floors cost about the same and are equally attractive to buyers. Choose the one you like.

Carpentry

• This includes trim, doors and sheetrock G. Plumbing
• You can save money by buying your fixtures at auctions on e-bay
• If you don't move anything around, you'll only have to pay about $500 to hook up your dishwasher and sink

Inked up Turbo Sonata..

This is one of my partner's new Turbo Sonata.. She inked it up yesterday, looks pretty cool.. Let me know what you think..

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