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Which
properties to buy. This is a topic that has a regional variable
to it and limited to financing available. Which neighborhood
you decide to operate in can make or break the profit line.
Put some thought into where you want to start rehabbing. This
subject is coupled with your research and here we will offer
some more advice on that too.
I
would start with two to three neighborhoods of looking and then
narrow it down before you start looking for what properties are
available. Farm the area, meaning drive around it, talk to
people and get the feel of the neighborhood. Look for for sale
signs, if there is a house for sale every other home, you might
want to look elsewhere, unless they are turning over quickly
and not sitting on the market for extended periods of time.
Make sure it is a neighborhood you are comfortable working in.
Being close to the home improvement stores is always a bonus.
Look
for foreclosure lists in that area. There are many available
online and most realtors have current lists of what is getting
repossessed and what already is. Simply ask for a list of REO
properties, these are Real Estate Owned by banks. Banks have
enough ways to make money, they don't want to be in the
business of owning real-estate. You can also approach local
banks and ask them if they have any REOs that they will be
parting with soon. This cuts out the middle man(the realtor).
Usually
the Bank will try to sell their REOs to recoup their loss
first, and if it doesn't sell HUD usually ends up with it. HUD
homes can usually be viewed through a realtor, but if they make
it to HUD because the bank couldn't sell it, it usually is not
a very good investment property for flipping. Either they want
to much compared to market value, it needs to much work to make
it marketable, or both. Most of the HUD homes we looked at
were very abused dwellings sitting at close to market value if
the house was already rehabbed. These make good starter homes
for people that are handy, or good investment properties for
rentals, but not usually good ones for flipping.
When
you get to crunching the numbers, you want to make sure you
have enough money to purchase the home, do the improvements &
cover the carrying costs for at least 8 months after the
improvements are done. The carrying costs consist of any
mortgage payments, taxes, & insurance. This will give you
an idea of what price range you can start in. Why 8 months,
because that will help you span most seasons of the year, as
some areas houses sell better in different seasons. Timing is
everything. If houses sell better in spring where you are
looking, then have your planned time line having you finish a
month before spring.
When
you choose your property look for ones that have things to be
done that you are capable of doing, especially your first ones.
If you are a roofer by trade, finding one that needs a roof is
an obvious plus for you. If you have dependable family members
in different trades, you may want to look for properties that
have deficiencies in their areas of expertise. Houses only
needing cosmetics are good ones, but they are also scooped up
by seasoned investors quickly. If this is what you are looking
for, be ready to act fast. We bought one house within a couple
of hours of being on the market, as our realtor knew it was a
perfect fit for our portfolio and wasn't going to last long.
When
looking for properties make sure you research and think things
thoroughly through. If you are a person that usually gets
accurate gut feelings, listen to those feelings. The house
that may look like a perfect cosmetic only that a realtor is
trying to jam down your throat, may be the one that has
structural walls full of termites. There will always be a
risk, and it is justified to be scared of some things, but
sometimes you get that gut wrenching wrong feeling, listen to
it.
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