With So Many Foreclosure Flops, the Best Opportunity for 2011 Lies in Flipping ‘Em

Most people these days are wary of making any investments in the real estate industry until the financial situation improves – however, with some time and effort the current gloom and doom outlook need not be. For the right investor, seizing opportunities that lie in REOs (Real Estate Owned properties) and making improvements upon them could be the perfect solution to keeping within the real estate arena yet doing so with considerable less risk. Here, we’ve put together some basics on what to consider when looking at a property to flip.

Assess Your Budget

Like any investment, purchasing a property with the intent to put more money into it to improve upon and correct existing problems, needs to be done with a well thought out plan. The very first thing to consider is what budget you can set aside for this endeavor. Keep in mind that many times a home that was previously owned by private owners and then subsequently foreclosed, has a chance to have hidden “surprises” and structural problems that are unexpected. When you are assessing your budget for a flip project, be sure to include an extra margin amount for those sometimes lurking beneath the surface and unforeseen expenses.

Review the Property

When looking at potential flip opportunities, we strongly suggest having a building inspector review the property for a clear picture of what you may be getting into. The types of homes that are ideal for flipping are the ones that simply could use a bit of updating; new floors, updated kitchen appliances, fresh landscaping. If what you come across are systemic problems, like bad plumbing, a weak foundation or an inadequate roof, it is best to steer away from that property.

Make a Plan

Many novices doing a flip for the first time make the mistake of not researching the steps needed and also failing to create a clearly outlined plan of action. When you embark on a flip knowing all the potential costs, having identified the vendors/suppliers you prefer to work with for the scope of the project and you know exactly what you want to change versus what you want to leave as is – the success quotient is much higher. It goes without saying that a project of this size without a plan of action is a recipe for disaster.

Be Disciplined

A lot of homebuyers who have ventured into property flipping recount having slipped out of their budget or letting the time frame and schedule lag significantly behind. It is very important not to steer away from your original plan, as much as possible. There will be times when you will have no choice but to handle something you hadn’t planned for in the first place, but generally, you will need to be vigilant about budget and schedule.

Choose Vendors Wisely

A very common mistake committed by inexperienced self-contractors during the process of fixing up a home for resale, is that the vendors and suppliers they choose are not certified or qualified with enough experience. While it may be tempting to hire the lowest costing service providers to handle your home improvement tasks, doing so can end up disastrous and even cost you thousands of dollars. This holds especially true for the larger improvements made to a property, such as a basement finishing or a kitchen/bathroom extension and remodel. The old adage “you get what you pay for” is one to be taken seriously when it comes to flipping a property and hiring qualified subcontractors is an investment within your investment that you can’t afford to ignore.

Be Realistic

Finally, when putting your property on the market after you’ve made all the necessary improvements, be careful not to overestimate the cost. By remaining realistic when pricing the property, you will most likely ensure serious buyers considering your property. Inflated prices will only hurt your chances to sell within a reasonable profit. Another thing to remember when putting up the home for sale is to be open with potential buyers. Being forthcoming about the circumstances, your involvement in fixing up the home and in what capacity it was purchased – will create goodwill with your potential buyers and even open up the door for more successful flips in the future.
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Transformation of properties, in order to improve and increase their resale value has been a phenomenon long-standing, however during the last decade or so the occurrence has multiplied. Especially with the number of foreclosures listed these days, now is the perfect time to buy and hold, or better yet, flip the property and make a handsome profit on it in the process!