Is Buying a Property to Flip It Wise?

By: Lee Bell
Submitted: 2008-09-08 13:12:07
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You may have already heard of flipping a home. There are two different modes of flipping properties. Some people purchase a home, make repairs or changes, and then sell the home for more money. Others purchase properties during a real estate slump when the prices are low, and hang onto the property until the market goes back up. Many people who use this method rent out the house until the timing is right to list it on the market.

How to Find a Home to Flip

One tip to flipping a home is to pick a property that is in a great location, where homes are in very high demand. You need to spend time looking over area sales before you make a purchase. If the area you are considering has several homes that have been for sale for a long time, move on to another area. Realtors will tell you that homes that have been for sale for a long time have low selling prices.

Considered foreclosed homes as an option for houses that can be flipped for profit. Homes that are being foreclosed on by the bank often need repairs to be done, so you will need to have a trustworthy home inspector look at the house for you. The home inspector can tell you what the problems with the home are, and then you can make a decision as to whether or not the home may be worth investing in. A bank-foreclosed home can costs much less than a comparable home in the same area, so when you do make the repairs and sell the home, you can make a nice profit.

Another situation where you can get a home a bargain is when the owners either can't or simply haven't completed needed repairs. They will oftentimes reduce the price of the home to get it sold. Once you make the repairs, the home goes back to a higher value and you stand to make money.

People who are skilled at flipping a home are looking for key words in the listing that signify that the seller really needs to sell as soon as possible. The words to look for are fixer-upper, foreclosure, must sell now, and vacant.

Getting a Loan the House you Plan to Flip

Recent changes in the world of mortgages are making it harder to gain financing for flipping homes. Nevertheless,it can be done. It's more possible if you have equity in your home already. You'll borrow the money using your home as collateral and then pay it back as soon as the property you are flipping sells. You can also take out a mortgage listing the property as an investment for rental, but make sure you understand any stipulations made by the bank.

Regardless, any bank offering you a mortgage loan to flip a house will generally loan 80 percent of the home's value. You need to find other ways to secure that other 20 percent; many have used credit cards or unsecured lines of credit. Keep interest rates in mind when choosing these options. If it takes months to sell the home, you'll be paying on your credit cards in the meantime.

The best way to finance a home you plan to flip is by finding a loan officer who has handled them before. If you locate the right lender, it's possible to secure funding for 100 percent of the home's value, plus an additional amount towards renovations.

Understand the Terms of Your Financing

The bottom line in this process is that you are okay with the terms of your mortgage. Some lenders require you to keep a home for a minimum time period, such as six months. Keep in mind that this waiting period is in addition to the time you will have to wait to find a buyer and complete the transaction. You will have to be able to afford the repairs and your payments on the mortgage until you are able to sell.

For house flipping, take a look at Santaluz golf homes for sale. Those on a tighter budget might want to check out Serra Mesa affordable real estate

Article source: Expert Articles

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