How To Flip A House Safely

By Author: KC TAN
Total Articles: 3698
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For anyone interested in real estate investing, one possibility to consider is ‘house flipping'. With the foreclosure rate currently on the rise, this method of investing can be all the more lucrative.

In simple terms, ‘house flipping' is the act of purchasing a home in need of repairs, renovating it as quickly as possible and then reselling it for a substantial profit.

There are several things to consider, before taking a project such as this. Although the majority of people who purchase real estate, for this purpose, do profit from the deal there are many others, who actually end up losing money and even their own homes, in the process.

It is recommended that anyone interested in ‘house flipping' take the time to consult an attorney about the possibility of setting up an LLC, before making their first purchase. An LLC could help protect personal assets, in the event of a deal going sour.

Typically, setting up an LLC costs a hundred dollars. Fees vary, from state to state.

Many first-time real estate investors get into trouble because their dream of making a quick profit, ...
... ‘house flipping', clouds their judgment. They either purchase the first house they look at or a home, which the previous buyer paid too much money.

(One rule to remember: just because a home is in foreclosure, doesn't mean that it's a good deal.)

It is best to look for and locate a ‘fixer-upper' in a decent neighborhood. Houses where the majority of the renovations are cosmetic are the best choice for first time ‘flippers'.

Renovations such as new paint, carpeting and basic landscaping raise the value of the property and can be done without the help of a contractor. Obviously, the more a person knows about home repair, going into a project, the better off they will be.

On the other hand, major renovations such as new wiring, plumbing and any type of foundation or structural repair DO require a contractor and can cost thousands of dollars.

When searching for the perfect home to flip, investors should only consider properties which can be purchased at 70% or less than their market value.

Once the home has been purchased, it is important to remember to use color schemes that are neutral or a current trend, during renovation. ‘House flippers' need to realize that even though their favorite colors may be purple and red, the majority of potential homebuyers won't have the same preference.