To Flip or Not To Flip: Analyzing a Deal
Here are two videos that will help you analyze if a property is worth flipping or not. The other flipping videos I’ve seen are selling the presenter’s credentials rather than actually teaching the techniques. In fact, I’ve seen another video thats talks about earning 6 figures a month just by flipping a property, could be real but sounds more shady.
In most Real Estate Flipping shows and presentations, they just present the purchase cost, show the renovation works, final product and then the profit from flipping the property. However, as I’ve written earlier not everything you see on TV is real, most of it is staged as what happened to Sam Leccima’s Flip This House Scandal".
The following videos looks more realistic and have factored in errors in estimates and other mistakes which is what actually happens in real life.
Source: YouTube: Rehab for Fun and Profit Part 4 submitted by RHLHouseguy
Here are some of the important topics discussed in this video:
1) Costs to Consider when Flipping a Property
- Holding Costs - It is the interest you pay every month for the money you borrowed to finance the property and other flipping related costs such as taxes and insurance.
- Buying and Selling Costs - This include the costs you have to pay when you bought the property and agent’s fees when you sell it.
- Total Rehab Costs - The total cost involved in renovating the property.
2) They emphasized a fair return of at least a minimum of $15,000 to make the project worth doing. Otherwise, you might end up with just a break-even or a loss.
3) Get a CMA report from your agent which has the comparable sales for the last 6 months. Drive by the sold homes and compare apples to apples. Subtract your estimated costs from the projected price and see if you have a
4) Never pay money upfront to contractors. Have a performance agreement in place. Ask the contractor how long it will take for the project to finish. If they go beyond your agreed date then you can deduct a penalty amount from the total contract price. Have a bidding for the subject project of at least 3 reputable contractors.
5) Better to overestimate than to underestimate.
6) Put your renovation dollars in things that sells in a house like the bathrooms and kitchen.
7) Estimates are usually "guesstimates". Have a budget for miscellaneous expenses and extra labor. Allot an extra 20% from the total estimated renovation cost for errors.
Source: YouTube: Rehab for Fun and Profit Part 5 submitted by RHLHouseguy
In this video presentation, the estimated renovation costs were compared to the actual rehab costs.
- They were $6240 over their estimated cost.
- The actual sale price was $14,000 more than the projected sale price, which covered the increase in renovation costs.
- The actual net profit for their flipping project was $33,372, which is $5,000 more than their projected profit.
Do you have any real estate flipping tips to add? Do you think real estate flipping is a quick and easy way to get a good return from your real estate investments?
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POSTED IN: Educational Tools, Road to Profits, Selling a Property, Uncategorized
1 opinion for To Flip or Not To Flip: Analyzing a Deal
Time and Money: Equally Important in Real Estate Investment
Jun 27, 2007 at 7:08 pm
[…] You can check out this related article I posted for a detailed example of calculating your net profits when flipping a property "To Flip or Not to Flip: Analyzing a Deal". […]
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