Archive for August, 2007
Flipping can Work in a Bad Market
Today’s market seems to reward flippers who are able to buy homes and gut them well, then start from scratch. Homes with terrible interiors, and unconventional basements, or weird pockets of space, can often be purchased very cheap and then cleaned out, repainted, re-floored, and resold quickly and for a good profit.
Finding homes with easily convertible basements or patios is an easy way to add square footage to a home, and make an old 1 bedroom 1 bath into a three bedroom 1 bath. It sounds great, but finding such perfect projects takes a lot of time hunting, and a trained eye to identify the diamond in the rough.
If you find yourself looking at a finished home, you’ll likely be impressed at the space addition, and new look to the formerly old home. That said, if you’re up to the project, I recommend doing it all yourself, rather than paying a flipper tens of thousands in profit for the month’s work they did.
Realize Flipping is Hard
Contrary to what many reality shows will have you believe, the average person will have difficulty purchasing a home and then immediately selling it for more. The key to successful flipping, and something that most shows don’t even mention, is to buy low…very low.
Money is made at purchase, and successful flipping is a matter of finding a property that is being sold for a good deal less than what it is actually worth. Locating such a home takes hard work, buying it without wasting too much on commissions and loan fees takes genuine financial talent, and finally, fixing it up and selling it for a profit all within a short time.
Can it be done? Sure, but it with today’s real estate market, it is certainly a risky proposition for a first time flipper. Many real estate shows will merely show a home selling for more because it appreciated in value over a year’s time. This is not true flipping, it is getting lucky through speculation. Just like day trading, many people get burned looking for quick easy money flipping.
If you want to make money in real estate, buy and hold. It may take a decade, but chances are you’ll sell for a lot more than you bought for, and be able to pat yourself on the back.
You Need an Accountant
If you’re looking to spend much more than $100,000, and chances are you’ll be spending a lot more than that, or if you stand to make quite a bit off of a property sale, it is definitely wise to consult with an accountant or a financial planner of some sort in order to avoid unnecessary taxes, fees, and maximize your investments.
I’ve said it before, and will say it again. Mortgage brokers are not accountants. They will not generally be able to advise you on tax issues, breaks or advantages in one loan over another. The same goes for real estate agents. Many financial planners will meet with you free, and present some ideas for saving large amounts of money over the long run. Always consult with another for a second opinion before making any decision.
In retrospect, I wish I had consulted with an accountant prior to purchasing my first home. Had I done so, I would have been made aware that I could use my IRA to pay my closing costs essentially tax free. One of the best things to realize when buying or selling a home is that you do not know it all. The right professional can save you a fortune.
It would certainly appear that doomsday is at hand for the ridiculous sub prime lending market. Today, Countrywide was mentioned as being in hot water as a result of their many holdings in the sub prime market.
I must confess that I find it hilarious that many sub-prime lenders are begging for a government bailout, like the ones quoted in the Countrywide article above. How fair would it be for the government to bail out them and not the thousands who these same banks foreclose on each month?
How to List your Home on the MLS Free
This will be the first of a series of information on ways to save money when buying or selling a home. While I am a licensed real estate agent in the state of Utah, I encourage people to always buy homes for as little as possible, even without an agent if ability and circumstance permit.
Perhaps one the best places to approach when thinking of selling your home is IggysHouse.com. They allow you to post on the MLS and on Realtor.com absolutely free of charge. While they naturally encourage clients to use some of their sister companies paid services, they are still hands down one of the cheapest ways to list your home if you plan to sell by owner. (Can’t really beat free now can you?)
While still a new service, you really have nothing to lose by trying them. If the MLS listing fails to yield a buyer, you can consider other options for selling your home quick.