My wife and I put my construction knowledge and her marketing savvy to practical use. Before I entered law school we flipped a home or two & here is where some of our experiences will be shared with you.
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I flipped a few homes when the market was still going strong. I can see here there is still a market for attractive, good quality products but the issue in our current market for any potential “flippers” is getting the property at a price that makes the investment and the work worth while. People who bought at the height of the boom with a view to flipping are now left with an over-priced property that either will not sell, will not bring the profit they were hoping for or will have to be sold at a loss. Of course each market is very individual, something which must always be borne in mind.
Thank you for your input Ms. Eva Cartmel
You are absolutely correct that some people who bought at the height are now left holding the bag. The problem was that they were not buying the right property.
True flip homes are those that are between 20% and 30% under market value of comparables for the mean home in the area. The target home most likely will be distressed by being a foreclosure, short sale, or in disrepair. My wife and I have always looked for the home in disrepair. Considering my background we know what we are buying and we could negotiate a deal without concern of another party buying it out from under us. We also live in them simply because we couldn’t afford to do it any other way. Aside from the economic benefit there are many other reasons to do so including ease of management, certain tax benefits, and the margins are higher.
For example, our current home was purchased 31% under market value. Putting 10% of our purchase price into renovations would bring the home back to marketable condition at the mean home price for our area. Our improved home including the purchase price and improvements is still 24% less than the mean home at the time of purchase. So even if the market fell by 24% we would still break even. We could also just live in it if things got worse.
Finding these homes does take patience. Our current project took over six months to find. We were looking while finishing the last one. We ended up living in an apartment for three months because of the timing but that is the way it works sometimes.