Flipping: Remodeling for Resale

With a glut of distressed properties on the market now, people are eager to make deals. But there’s little room for error. You have to be smart about the houses you buy and the repairs you make. You also have to be prepared to hold your property for the long-term, or you could wind up with a house you can’t sell and a mortgage payment you can’t afford. But if you’re going to try to flip houses, here are some things you have to know.

Finding the Right House

Real estate investors live and die by the numbers. You have to fall in love with the deal, not the house. And great deals aren’t going to jump out at you. Experienced investors spend time every day looking for distressed property and have a network of people scouting deals for them.

Some investors make a point of taking a different route home from work to look for possible deals. Others, like Sid Davis, a real estate investor and the author of Home Makeovers that Sell: Quick and Easy Ways to Get the Highest Possible Price, recommend picking out a particular neighborhood and driving through it regularly. “Look for the best deal in the best neighborhood,” Davis says. “Even in the best areas, there are always people who need to sell quick. Pick a target area you want and make up flyers that say, ‘I can close in a week’ or ‘Cash up front.’ There are a lot of people in trouble. ”

Look for is a house that’s priced far below market value, experts say. That’s the only way to make money in today’s market.

Finding Financing

Even when mortgage underwriting was loose, bankers were tougher on investors than on owner occupants, requiring more money down and charging higher interest rates and fees. Today lenders are tighter than ever when it comes to lending money for real estate investment.

For rehabbers who own a home, it may be easier to get a home equity line of credit and use that money for the required down payment. But understand what you’re doing: You’re putting your own home at risk if you can’t sell the property and fall behind on the payments.