Flipping in a Changing Market

Ever heard the expression "Get in on the Ground Floor." What exactly does that mean? In the housing market it doesn't mean getting a great first floor unit, or waiting until there are 10 different Cable TV shows covering the new "flipping" market.

Despite what the media says it is quickly becoming a buyers market in some areas. Homes can be bought "cheap." I am not sure how buying a cheap house, fixing it up & then trying to sell it can be profitable in this market. I have now seen several "Flipping" shows where the owners have made terrible mistakes costing them their potential profits. I feel like I am watching the big game shouting at the TV "Get an agent" "what are you thinking, putting assemble yourself cabinets under a granite counter-top, who does that?" & "why are you paying $500,000 for a 1 bedroom 1 bath house you are going to flip?" "why haven't you rented it out, it's been vacant for 6 months?" I am a lot of fun to watch TV with!

I can tell you that where I live the housing market is different & the prices are relatively lower than the norm on these shows. There isn't a huge influx of new people & the houses themselves are older. I have literally fallen off the couch at some of the prices they throw around on these shows. I can tell you that I could completely gut my house, remodel it & buy 2 more of them with what a two bedroom duplex costs in some parts of the country.

I have been watching our local tax auction & foreclosure lists closely. The area is maintaining, I don't feel that it is declining or booming at the moment, but the second it starts to decline there will be a ton of homes to be had at rock bottom prices. I do not ever dream that I could make $100,000 buying a home in our area & flipping it. We have been looking at our options and I believe the option for us is to partially flip. We can buy a home on the cheap, fix it up (bring it to code, update a few fixtures, etc) then rent or lease it out. Our area is attractive to renters, low utility costs, and semi attractive to buyers, low utility costs, but high property taxes.

Renting a property is a way to generate monthly cash flow, build equity, and invest in our community all at the same time. You have to know your market as with any investment, research needs to be done. Real research, not just looking up a couple properties or watching some TV shows. You need to be educated in what you are doing. Then you know how to get the best deals & when you go to close that first big one (you may be afraid) you'll be confident that you did all you could do to make this a sound investment. It is all about taking appropriate risk. You aren't going to go to Vegas & throw your last $1 down on the roulette table, so don't throw away what little savings you may have on a poorly researched business venture.

If you are looking for a personal property, there are so many factors that you need to consider. The realtors will tell you it's all location, location, location. Of course for the first time home buyer location may not be everything. The key is not to buy more house than you can afford. Don't forget to include maintenance, repairs, taxes, insurance, & redecorating in your calculations. Don't make the mistake of automatically assuming that you are better off buying. & that your house is your greatest asset.

Looking for a place to live, why not buy a multi family? Be careful about number of units, 3 or more units may not qualify for a traditional mortgage, or get the best rates. Also, many municipalities consider 3 or more units commercial property, which could make a difference in your tax assesment. So do your homework. But in doing this your house can generate you a positive cash flow that can help your monthly budget out a bit.

I'm not saying don't flip. I'd love to be knee deep in demo work right now (I love power tools!) but I know that just because it works in a different state & area doesn't mean it will work here or for me. So for me to get in on the trend I'd have to find the perfect property & I'd have to be willing & able to hold on to the property as long as I had to.

By the way, if you are a flipper, or want to try, please don't say "Our budget is $10,000 and we have 8 weeks" This barely works for the professionals that flip houses! Be realistic, it will take at least 12 if you have no major set backs & there really is no way to gut a kitchen, put in hardwoods, new carpet, replace bathrooms, fix drywall, paint & landscape for that amount of money, unless you plan on stealing the neighbors shrubs!