This is a very popular trend due to HGTV and reality shows such as Flip or Flop and Masters of Flip. It can be a very lucrative opportunity but it requires patience
and finding the right properties.
You can either flip and hold or flip and sell. Depends on profitability, cash flow, and future goals.
There is a saying in real estate “you make your money going in”. This is very important to understand and requires patience. You shouldn’t rush it because you’re excited and ready to get started. You need to begin with the right one to ensure success.
Where do you find homes to flip?
1. You can canvas neighborhoods and be on the lookout for homes in need of repair and contact the Seller directly.
2. The Registry Review posts all upcoming auctions and foreclosures along with everything else real estate related.
3. Real Estate Agents. It is highly likely Realtors know of homes that are coming to the market soon.
This is a great solution to building long-term wealth and passive income. It is always a great idea to have a well-rounded investment portfolio and real estate should definitely be a part of the plan. The question is should you hold short-term or long-term? And, based upon your objective and the market will determine the answer.
Before you begin investing in real estate you should have an experienced real estate agent along with a financial advisor, real estate attorney, and accountant. There are so many advantages to owning real estate and each of these professionals will guide you so you make the best decisions.
Some common questions I get asked by investors:
1. How much money do I need?
I will say if you own a home and purchase a second home, most lenders want a minimum of 15-25% down.
2. What will be my Return on Investment (ROI)?
This is where you need your Realtor so you can get the most accurate information on the rental market. What would negatively impact or positively impact your property in the
forseeable future? Who are the top employers within a market? What are the demographics of the area, etc?
3. Who manages the property? There are two answers to this question.
a. You. So, you need to consider the location within the proximity of where you live.
b. Property Manager who will charge about 8-15% of each month’s earnings.
4. What happens if the tenant stops paying?
The short answer is to hire a good attorney to make sure this is resolved quickly. You should always follow the letter of the written agreement. Meaning if you are lenient and loosey-
goosey, don’t expect a judge to be the enforcer when you run into issues because he will look at you. React to issues immediately and exactly how the lease states you would do so.
These are just a few of the most common questions I am asked.
But I would like to let you know that anyone can invest and most people should.
Here is the best-case scenario:
You purchase a 2-unit home. The sales price is $300,000 with taxes at $6,500 annually with an average rental income of each unit at $1,400 per month.
1. You will need $60,000 as a down payment.
2. Closing costs will be about 3% of the sales price so factor in another $9,000 which can be paid by the Seller.
3. Financing $240,000 at 3% estimated Principle and Interest (P&I) is $720 plus your monthly taxes which is $6,500 divided by 12 = $541 per month and
homeowners insurance estimate $100. This would estimate the monthly payment of $1,361 per month.
4. Your rental income is $1,400 x 2 = $33,600 per year.
5. Your rental income will be paying your mortgage off over the next 30 years.
6. End of 30 Years you have an asset worth whatever future amount it will be and you were reimbursed your $60,000 by year 2 and have paid nothing for the pleasure of the asset.
This of course is a simple scenario but can become complex based upon market value and rental income. The money is in the details. Don’t overlook anything and if you
have some extra money and would like to explore the idea of flipping or investing I would love an opportunity to explore how you can build wealth with real estate.