Buying a house to rehab and flip for money can be a great way to make some money but be prepared, it is a lot of work. Remember the old adage, “If it were easy everyone would be doing it.”
The best advice I can offer is this, you make your money when you buy the house. If you overpay for the house it makes it very difficult to make a good profit or any profit for that matter. By buying the house at the right price it allows you to make all the needed repairs and still turn a profit.
A real estate agent can help you find a good property in a good neighborhood and give you a good idea of what you estimate the rehabbed house can sell for. The real estate agent can help you get the home for the lowest price and favorable terms.
You will need to estimate the rehab costs and holding costs. Be prepared for the unexpected to come up and add this cost in when estimating your rehab costs, there will always be something. Inspections by quality professionals can greatly aid you in estimating your rehab costs and help you avoid unexpected costs. Time for inspections need to be included in any real estate contract you put on a house. As an example, a plumber can come by the house and send a camera through the main line to insure there are not any breaks as this is a costly repair. The plumber will cost $100 to $150, where a mainline repair will cost several thousand dollars. Other areas it is a good idea to have inspected are the furnace and AC, the electrical panel and wiring, the structural support for the roof, the condition of the roof, foundation, floor joists, and termites. A few hundred dollars well spent on inspections can keep you from buying a money pit and save you thousands in the long run. The more information you can gather the more accurate your cost estimate will be.
An important thing to remember, are the holding costs associated with the home, these include insurance, taxes, and payments on any loans. For these reasons time is of the essence. Work you can do yourself will save you on labor costs, but if it greatly increases the rehab time this will increase your holding costs. Work you do yourself, will also usually take longer than you think. Trips to the hardware and tool rental stores add up quickly. It will also be important to have the number of several service professionals like plumbers, electricians, tree trimmers, roofers, landscapers, Realtors and others. These professionals can do the work in a timely manner thus saving time and money.
Remember when rehabbing a house the idea is to maximize profit. Consider the costs of everything you put into a house and weigh that against the value it will add to the house. Does adding hardwoods over carpet make sense? Only if it adds enough value to offset the additional cost. Again a real estate agent can assist you with that information for the neighborhood your home is located in.
The more planning you can do the better, just remember to not rush into anything, and get all the information you can. Once you gather all your information and create the best rehab cost estimate you can, then you can make an educated decision on whether to buy the home or pass. Don’t try to force a bad deal, its ok to walk away rather than lose money on a flip. The better price you can buy the house for the better your odds of a successful flip, just try to limit the surprises.