Tips for Earning Money Flipping Houses

With the economy bordering on a recession, many people are seeking alternative ways to make money. Competition is high and with shows like "Flip That House" on television, the idea is catching on. Here are a few tips for earning the most profit and deciding if this business venture is right for you.

1. Do it yourself. Let's face it; if you are not a handy person capable of completing most home repairs by yourself, you may be in the wrong business. At least a moderate knowledge of building codes, electricity, plumbing, dry walling, flooring and kitchen and bathroom renovations is required. If you have to contract out most of your work, your profit likely won't be worth the time and energy required to complete it.

2. Research the best way to finance your project house. Putting a mortgage on your house isn't always the most profitable decision. If you have the equity to buy your house with a credit line, it may be cheaper. Consider the mortgage rate against the interest rate of your loan and factor in any penalties you will need to pay for breaking it. To get the best mortgage rate you will usually need to lock it in for five years or more but will be penalized greatly when you sell your house after only a couple of months. Do your accounting.

3. How much time do you have to dedicate to this business? Are you working full-time at another day job? Do you have small children or other family responsibilities that consume a lot of your time after work? The best way to make money flipping a house is to turn it over quickly. You don't want to be paying interest, bills, taxes and insurance on your place for more that a couple of months. Firstly, you need the money to pay for these expenses up front and secondly, it just eats up your profit.

4. Invest in a pick-up truck or large van. When you are bargain hunting for building supplies you need to be able to transport them around at will. The last thing you want to do is pay money for delivery or have no immediate way of purchasing it. Although a couple of the larger tool stores offer free delivery, it is usually only after you spend a considerable amount of money at their store and you will lose out on getting the best deals. If you buy a truck and make it your every day vehicle, you can stop off at stores or your project house after work if you need to.

5. Research the tax rules in your area. You may be able to write off the purchase of your truck and some of the gas you use. Know what you can and can't write off and keep your receipts. If you don't mind moving, you can make the project house your primary residence and in Ontario can save paying 25% of your profit back to the government for capital gains.

6. Don't do any more renovations than necessary to resell your house for a good profit. Tour some houses in the same area as your project house and take a look at their asking price. You don't want to make your house the most expensive in the neighborhood, or you risk having to lower your asking price or staying on the market too long looking for the perfect buyer. If comparable houses in the neighborhood don't have slate tile floors and granite counter tops you may be okay laying laminate flooring instead of hardwood. It all depends what neighborhood your project house is in.

7. If you are renovating a multiplex or a house with a granny flat, you can fix up one unit and rent it out while you renovate the rest of the building. The extra income you earn can cover costs like mortgage payments, bills and insurance. A landlord looking at purchasing your rental property will be impressed if there are already paying tenants. Just a word of caution, make sure you do a thorough screening process of any tenants first.

8. Don't pay too much for your project house. Maximizing your profit depends a great deal on getting the best bargain on your house to begin with. Check the on-line realty systems daily. As soon as you spot a project house on the market, tour it immediately and put in a "low ball offer" the same day. If you are knowledgeable and don't need a house inspection, you will have a greater advantage. Once a seller makes a counter offer, even if not making much of a change to the original asking price, they cannot accept any other offers that come in. A house that already has an offer will also scare away some of your competition.

9. Get licensed on related fields. Having your builder's, real estate or home inspection licenses can help save you money and make you more knowledgeable about 'house flipping'. It also gives you advance knowledge on houses coming up for sale, what the houses were previously sold for and what exactly is wrong with a house without paying anyone else for their services.

10. Insure the contents of your project house well. If you are going to be leaving your expensive drills, saws and building supplies inside a vacant house you need to protect yourself from possible theft. Taking pictures of your belongings, keeping receipts, changing the locks on the house or keeping your tools elsewhere is just common sense.

Even with the housing market in a downward spiral, real estate is still a great investment. Buying houses in neighborhoods that are in demand or easily rentable areas are your best bet. If your house is by the local college and you are having trouble selling it, you can always rent it out for a while and try the market again later. As with any good investment there is always an element of risk or luck involved. Happy house hunting!