There are two primary ways you can make profits by flipping houses. The most common is rehabbing. You buy a house needing a major repair or that hasn’t been remodeled in 30 years. The property for sale is one that the seller can’t or won’t make the repairs or improvements to. You buy it super cheap, make the improvements, and sell it for much more than your costs.
The second method is finding homeowners in financial distress. The seller can’t make the monthly mortgage payment and is probably on the verge of being foreclosed on. They’re going to lose the house anyway and are willing to sell for what they still owe on the mortgage to keep the foreclosure off their credit report. These were much more common a couple of years ago because of the mass foreclosures that were happening. There is still property for sale because of foreclosures, just fewer of them.
Property for Sale – Profits are Up
According to a recent study by RealtyTrac, property for sale as a flip brought in an average profit of 30%. That’s up from a year ago when profits were way down at 4%. Another study found that the average amount spent making improvements is much less than you might assume – $4,800. Of course, how much you make when you have a property for sale depends a lot on location.
Some of the hottest markets right now are:
- Pittsburg – ROI 89%
- Philadelphia – ROI 56%
- Memphis – ROI 51%
- Detroit – ROI 48%
- Seattle – ROI 48%
Of course, even within these major cities results will vary by neighborhoods. In Pittsburg, houses prime for flipping cost an average of $55,000 and sell for almost twice that. In Philadelphia, flippers are buying for an average of $166,000 and selling in the $260,000 price range.
Property for Sale – Know Your Costs
The average price for improvements may be only $4,800 but your costs could go much higher. A complete kitchen upgrade with new appliances, cabinets, and granite counters can cost upwards of $55,000. A major bathroom remodel can be in the $16,000 price range and new roof on a typical house will come in at about $19,000.
Most flippers are obsessed with numbers. Before putting up property for sale, they want to know what every house in the neighborhood has sold for, loan interest rates, property taxes, and more. This is in addition to what the rehab is going to cost or how much the outstanding mortgage is on a distressed sale. They take all of the numbers into consideration before making a purchase offer and again before putting the property for sale.
Besides reading this article about property for sale as flips, you’ll want to read this other useful information that I offer free. Please take advantage of it today.
Several times each week, I make the most current real estate investing information available to readers. This time, it’s about the homes for rent versus flipping investing model but the information I provide changes constantly to stay current with the market. Be sure to check back at: www.wendypatton.com. Also, get started learning how to do NO CASH lease options on real estate by picking up a copy of my bestseller book: Investing in Real Estate with Lease Options and Subject-to Deals.
By Wendy Patton