T.V. shows make it look easy, but there are a lot of pitfalls and perils to be aware of when it comes to flipping homes for profit. In the current economic climate, flipping homes can present two sides: first, foreclosed homes are everywhere, and in varying states of value. Flipping these foreclosed homes can be easy or difficult, depending upon whether the previous owner kept up with the maintenance. However, with the major lenders tightening their lending standards, as well as the amount of cash that they are lending, you might be hard pressed to find the kind of loan necessary to flip homes. Much of the problem with the situation is that these banks, as well as not loaning money to people who are trying to flip homes, but the homeowners themselves are having trouble finding financing.
In a few states, foreclosed homes are so abundant that there isn’t a street that doesn’t have at least one foreclosed home which has the potential to be flipped. If you have the financial wherewithal to bear out the market, you’ll find that you could amass yourself quite a little empire in a relatively short time. Home prices are as low as they’ve been in years, and those who are buying homes are tending to buy starter homes. These are necessity purchases for many who have leases running out, or perhaps have saved enough to put down a substantial down payment. Flipping a home, on the other hand, is now seen as being trivial in many ways. The money is there to be made, however. The first rule of flipping a home which was a foreclosure is don’t skimp on the inspection. Consider this you’re A-Z guide for the things you’ll have to fix. For the hundred to five hundred dollars, your foreclosed home will get a thorough inspection. Take that into account with the sale price, and then estimate your costs to rehab the foreclosed home. If it will cost you more to fix the foreclosed home than the current market value of other homes on the same street, you’re going to be stuck with it for a while, so vary your offer accordingly. Most foreclosed homes, however, are going to sell slightly below market value due to the desire of banks to drop what is increasingly becoming bad debt. If you feel that you can rehab the foreclosed home with at least a 20% profit margin after all your costs are factored in, than you’ve got a pretty sound investment on your hands. Consider all the other factors involved in the usual purchase of the home, and you’ll be in good hands.
Flipping homes can lead to a rewarding investment opportunity, particularly in today’s economic climate, but the perils of having to hold on to a flipped home can quickly outweigh any potential reward. Your 20% profit margin can disappear as quickly as it is realized with simply having to make two or three mortgage payments. The worst thing that a home flipper can imagine is to be upside down in the mortgage of a house you aren’t even living in. The news was rife with such stories, of “victims” of the banks “greed” when they find that their millions of dollars worth of foreclosed home inventory which they are trying to flip is now worth less than half what they expected. Flipping homes is not for the overly ambitious, it is for those who carefully cultivate the precise environment that will sell the flipped home quickly, and earn them a little profit on top. If you don’t fall into that category, than flipping homes isn’t for you right now.