I watch the show Property Ladder on TLC and it drives me crazy. You see the house flippers buy a house to renovate as investment property and they always ignore sound advice, spend too much, and take way too long - - and they usually make a boatload of money doing it.Even in these tough times, with the housing market crashing back to Earth, they're still able to turn a profit. But not everyone is so lucky. Investors and speculators have fled the real estate market in droves. The national inventory of homes for sale is well over a million and a half and rising.
However, in each state, each city, and even each neighborhood there may be an opportunity for you to buy a house, fix it up, and sell it and make a little money.
If you're still interested in flipping a house, here are some tips from Inman News:
TEN ATTRIBUTES OF PROFITABLE FIX-UP HOUSES:
by Robert J. Bruss
1. Basically sound condition without major structural defects. In most communities, this means looking for three- or four-bedroom houses with good foundations and without a major need for renovation other than cosmetic fix-up. Avoid two-bedroom houses unless your town has a strong renter or buyer demand for these smaller homes.
2. Good location with a low crime rate. No matter how enticing a run-down, profit-potential house might be, if it has a poor location there's little or nothing you can do to cure that.
For example, houses next to a noisy freeway or on a very busy street won't appeal to most other buyers except at bargain prices so there is little you can do to raise values in an undesirable location. If most of the nearby houses are run-down and poorly maintained, they will drag down the value of your house. However, if you buy a run-down house in a good neighborhood of well-maintained homes, they will drag the market value of your home up after it is renovated.
3. Good-quality school district. Even when a house is in sound condition in a good location, if the public schools are of poor quality, that greatly hurts the resale value for fixer-upper houses. Always look for houses with school test scores at or above the median for the area where families with children are attracted.
4. Need for profitable cosmetic fix-up work, but not major unprofitable repairs. Examples of profitable cosmetic improvements include fresh paint inside and outside (the most profitable improvement you can make), new light fixtures, new carpets and flooring, and fresh landscaping.
But stay way from fixer-upper houses that need unprofitable work such as new wiring, new plumbing, foundation repairs, major kitchen and bathroom renovation, room additions, and a new roof. These expensive, unprofitable improvements rarely add more than their cost to the market value of the home.
5. Purchase price at least 30 percent below the market value of nearby comparable homes in good condition. "Buy the worst house in the best neighborhood" is a sound motto to follow. Another good motto is: "Your first profit is earned when buying at the right price."
If the seller won't heavily discount the sales price to compensate for a home's run-down condition, keep looking until you find a house with profit potential meeting the criteria explained here.
6. Purchase from a motivated seller who is anxious to sell. Motivating reasons for selling a home include job transfer, pending foreclosure, divorce, health reasons, family birth or death, and unemployment.
If the home has been listed for sale at least 60 to 90 days with no offers, even if the asking price is too high, that is another indication of possible sales motivation so it may be time to make a "lowball" purchase offer.
7. Affordable low-down-payment financing. Taking over an existing mortgage (called buying "subject to"); a lease with option to buy; seller carryback financing; or a combination of these methods indicates probably easy financing.
If the house is in bad shape, avoid obtaining a new mortgage unless it is approved by the lender on an after-fix-up, market-value appraisal. After your fix-up work is completed, that's the time to get a new mortgage, based on the home's increased market value.
8. Seller or tenant will vacate immediately upon transfer of title. The best way to profit from a fixer-upper house is to work on a vacant structure. Attempting to make improvements while the seller or a tenant lives in the property makes the upgrading work doubly difficult.
9. Within a 60-minute drive from your current residence. During renovation of a fix-up house, it pays to visit the property nearly every day to be certain the work is getting done correctly.
When the owner doesn't inspect frequently, the workers often don't show up or they slack off. Incidentally, never pay contractors by the hour (except for minor work) and always pay by the job after it is finished to your satisfaction.
10. Good demand from renters and/or buyers. Unless you plan to live in the fixed-up house, it pays to consider the current demand for houses from renters and buyers. If local employment and economic conditions are good, chances are home values are stable.
However, if more people are moving out than are moving into the community, maybe it's not the right time to invest in a fixer-upper house there unless it can be bought for a 40-50 percent discount off the market value of nearby homes in excellent condition.
RELATED POSTS:
Flipping Houses: A Real Estate Investing Update
How Not to Beat the Bursting Housing Bubble
Ways to Improve Your Homes Value
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* photo courtesy of TLC network
