Tag: House Flipping

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Flipping

3 Best House Flipping Shows on Discovery+: Lessons Learned and Caveats to Keep in Mind

Source: Annie Gray from Unsplash.

Are you looking for inspiration and a bit of entertainment to fuel your house-flipping endeavors? Look no further than Discovery+’s selection of top-rated shows featuring experienced professionals.

Each show offers valuable lessons on how to achieve success in the world of flipping. From navigating tricky negotiations to making quick decisions for maximum profit, these transformation stories will both surprise and entertain you.

While it’s important to approach these shows with a grain of salt, there’s still much to learn from them. Here are the three best on Discovery+ to get you started.

#1 Flipping 101 With Tarek El Moussa

Flipping houses can be a daunting task, but Tarek El Moussa’s show FLipping 101 makes it easy. With over 300 homes flipped in his career, Tarek is a seasoned expert in the real estate industry.

Source: HGTV

He uses his wealth of experience to help novice investors navigate the tricky waters of house flipping and turn a profit. With Tarek’s guidance, viewers can learn how to assess a property, create a budget, and manage a team of contractors. Flipping 101 is a must-watch for anyone interested in turning their passion for real estate into a lucrative business.

What sets FLipping 101 apart from other house-flipping shows is Tarek’s emphasis on function over form. While a pretty bathroom might be tempting, Tarek understands that it needs to be functional for everyday use to avoid wasting space and money. By sharing his own mistakes, Tarek helps viewers avoid costly errors and achieve success in their own flipping endeavors.

Don’t miss out on the opportunity to learn from Tarek’s expertise—watch Flipping 101 With Tarek El Moussa on Discovery+.

#2 Fix My Flip

When it comes to flipping houses, doing things right is critical to achieving success. After all, why invest time and money into a project that won’t yield the desired outcome? That’s why I always say, “What’s the point in doing something if you’re not going to do it right?”

But if you’re struggling to achieve your flipping goals, don’t despair. Help is at hand with Fix My Flip.

Source: HGTV

With their expert knowledge and skills, they can take any fixer-upper and turn it into a masterpiece, so you don’t have to settle for a sub-par renovation job.

One of the most valuable lessons from Fix My Flip is the importance of making decisions based on numbers rather than emotions. Flipping houses can be an emotional experience, given the significant time and money investments involved. Remain objective and analyze the numbers to ensure that your project is profitable: that’s the moral of this show’s story.

So, if you’re ready to learn from the experts and transform your fixer-upper into the home of your dreams, tune in to Fix My Flip on Discovery+ today.

#3 Property Brothers

Well, well, well… If it isn’t the Property Brothers.

With over a decade of experience in the industry, the Property Brothers are the go-to experts for anyone looking to buy or sell a property. Their ability to stay within budget while still overdelivering on their clients’ dreams is a testament to their exceptional skills.

Source: HGTV

Whether you’re a first-time homebuyer or a seasoned property owner, these household names can make all your wildest real estate dreams come true. From finding the perfect home to transforming it into a stunning masterpiece, these brothers have got you covered.

For inspiration and guidance in your own real estate endeavors, tune in to Property Brothers on Discovery+. With their expert and captivating transformations, you won’t want to miss a single episode.

Caveats to Keep in Mind While Watching Flip Shows

While these shows can be inspiring and entertaining, remember that they may not always reflect the real challenges and risks involved in flipping houses. It’s crucial to approach them with a grain of salt and consult with professionals to ensure that you’re making smart decisions.

Here are some caveats to remember:

  • Flips always have some risk, no matter the cost of repairs and market conditions. These shows make flipping look easy, but it takes hard work and knowledge to be successful in this business.
  • Don’t expect your flips to turn out just like the ones on TV. The timelines, budgets, tools, and markets in real life may be completely different.
  • TV shows often leave out important details and show the most attractive parts of a flip. There’s no way to predict whether your flips will turn a profit or even break even—and that’s okay!
  • Flipping houses takes time, money, and experience to set yourself up for success. Working with experienced professionals can help you learn the ropes and reduce risk.

Ultimately, these shows are fun entertainment, but shouldn’t be taken too seriously when considering your own house flipping projects. Do your research and consult trusted experts before embarking on any major renovation project—it’s never as easy as it looks.

Learn From These Shows, But With a Grain of Salt

Discovery+ offers a great selection of top-rated shows that provide valuable insights and lessons on how to achieve success in the world of real estate flipping, such as how to deal with difficult situations and interact with others in a variety of contexts.

From Tarek El Moussa’s emphasis on function over form in Flipping 101 to the importance of making decisions based on numbers rather than emotions in Fix My Flip, and the Property Brothers’ exceptional skills and expertise, each show offers something unique for real estate flippers.

With the right guidance and hard work, you too can turn your passion for real estate into a profitable business. Tune in to Discovery+ today to take your flipping endeavors to the next level.

And, once you’ve feasted on several episodes, join as a REIA member, and join our community of flippers and other real estate investors by subscribing to our newsletter, and joining our upcoming REIA meeting.

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Flipping

Beginner’s Guide to Flipping Apartment Buildings

Top corner of an apartment building.
Anders Holm-Jensen from Unsplash

So, you’ve been flipping single homes and you know the process by heart. Now, you want to take it to the next level—flipping entire apartment buildings. But you don’t know where to start.

Flipping apartments is a whole new ball game—it’s not just about buying low and selling high, it’s about knowing the ins and outs of the market and the property itself and being able to identify areas for improvement that increase the overall value.

Just be aware that flipping apartment buildings usually takes a lot longer than flipping a house—often 1-3 years.  Here’s the ultimate beginner guide to flipping flats like a pro.

Finding a Good Deal

Finding a good deal on apartments for sale might seem overwhelming, but it doesn’t have to be.

To avoid a bad investment, you’ve got to understand your market, so find a good local expert to help you get to grips with the area, if you’re investing somewhere other than your hometown.

Have coffee with a commercial real estate agent to pick their brain about the market, tenant demographics and the demand for apartments in the area by asking questions:

  • Who’s selling apartments and why are they selling them?
  • Who looks at this area to buy properties?
  • Are people flipping apartments here? If so, what do their returns look like?

Keep in mind that finding apartment buildings for sale isn’t as easy as finding a single-family home by scrolling online listings, because more apartment deals are sold off the market compared to single-family units.

The reason? Typically, apartment owners don’t want to put up a for-sale sign, because they don’t want to scare the current tenants or they simply don’t want other people to know that they’re selling.

So, to find apartment buildings for sale, ask a specialized real estate agent, or work on building your own seller’s list of multi-family property owners in your target market.

Understanding the Deal: Rent Rolls

When it comes to underwriting a property deal, it’s crucial to have a sharp eye and a shrewd mindset. Before you seal a deal, close your eyes and take a deep breath: ensure you’ve identified potential obstacles, assessed financial risks, and considered market factors, such as rent roll and rates.

Asking about rent rolls helps you understand what’s going on in the apartment, like a list of units (including size, number of bedrooms and number of bathrooms), the names of tenants, and monthly rents.

Evaluating the Deal

Evaluating apartment buildings is different from analyzing deals on single-family units. Single-family properties use comps, while apartment buildings use cap rates. This means that the single-family properties are valued by how much the last similar property was sold in the same area.

By using the cap rate formula—which involves considering the purchase price plus operating costs—investors can better understand how much they will earn relative to their total expenditure.

Get the cap rate using this formula:

Cap Rate = Annual Net Operating Income divided by Price or Value

In short, the net operating income of the apartment property plays a big factor in determining its value – not the amount that a comparable building recently sold for.

The good news is you can increase the value of an apartment building just by increasing income or lowering expenses!

Inspecting the Deal

It’s not enough that you see the property on screen or paper. You have to go out and actually see the apartment building yourself to find out if there are any differences between the comps and the actual property.

The state of the property will be a big factor during your planning. Get a contractor that can help you understand the costs of renovation before you purchase the property, then factor these into your investment cost.

Once you’ve had a contractor’s inspection, and before you make an offer, get an inspector to thoroughly look at the property to verify its market value.

Setting Up Financing

Now that you’ve found a promising building to purchase, it’s time to talk about financing.

Pro tip: Don’t take the first loan offered to you. Instead, look around and find the best loan offer in terms of time and rate. Personally, we prefer a more extended period of time for the loan, since having a low and fixed rate means you’ll pay less throughout the duration of the loan.

It’s already a lot of work to flip apartments, so lessen the headache by settling the terms of payment terms. At the end of the day, you choose the payment terms that work for you and your situation.

Selling the Property

After all the hard work and effort you’ve put into the property, it’s finally time to sell.

Have a specialized real estate agent get the word out and find potential buyers for you. But don’t rely solely on someone else’s sales skills – you should always be building active buyers lists of your own, just like you should be building relationships with potential sellers.

You can market your apartment building flips directly to your buyer’s list, and even do an off-market deal to avoid additional fees and commissions.

The beauty of flipping apartment buildings is that even if you don’t get an offer right away, you can go back to the bank to refinance or hold onto the property a bit to rent it out yourself.

Know the Property to Sell the Property

Flipping apartment buildings can be a bit different from flipping single-family homes, but if it’s your first time, these pro tips can help when you’re thinking about getting into the venture.

It all starts with planning—finding the right deal and evaluating the property and renovation costs are all important factors to ensure your flipping journey is profitable.

This guide can set you on track to flip an apartment successfully. When you’re ready to start your venture, join us as a REIA member for step-by-step support and ensure your long-term success in the industry!

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Flipping

How to Flip Commercial Properties

Source: Nastuh Abootalebi from Unsplash.

With 80% of office stock built in or before the eighties, many commercial spaces in the market have a huge flipping potential for real estate investors like you.


Large floor, concrete and glass commercial properties are tempting to reinvent from the ground up, as starting fresh may better meet the market’s demands. Even after the industry taking a big hit due to Covid-19, the industry is still trying its best to stay afloat.

Flipping commercial properties shouldn’t involve much hassle and should land you impressive profits… If done right. Before you invest, consider the top factors to ensure a successful commercial property conversion that results in profits—not stuck with a property nobody wants.

Let’s discuss all that below.

Know Commercial Property Types and Uses

Consider the needs of each property type and use. Different commercial property types have different purposes. Before you decide how to flip a commercial property, ask yourself, “Does this property have all the features and factors that’ll make it attractive to buyers?”

For example, office spaces are typically leased for businesses, and retail properties are used as storefronts. Industrial properties are ideal for warehouses or factories, while vacant land is perfect for development projects. Multi-family buildings are often associated with residential housing but can also include spaces for restaurants and local businesses.

If you’re flipping a property for office use, does the property have sufficient parking spaces? If it’s a retail space, can it accommodate heavy foot traffic (if there’s any nearby)? Think of what the end-user will prioritize, because that’s what the buyer will focus on—and so should you.

Moreover, take a look at the trends of each commercial property type. For instance, office spaces became risky investments over the pandemic, where companies implemented hybrid and remote work setups. The trend brought the vacancy rate of office spaces up to 15.4% in Q3 of 2022. In contrast, industrial properties and multi-family buildings only have 4.4% and 6.0% vacancy rate, respectively.

So, take advantage of properties with low vacancy rates or located in areas with limited space for new developments. Those spots offer a good supply and demand situation for your investment, where low-supply, high-demand markets make flipping commercial properties to sell at a high price easy.

Calculate Property Values & Demand for Accurate Pricing

There are several ways to determine a property’s value. You can run with one or be a perfectionist by using each method (we recommend the latter!). Ultimately, you’ll want to choose the methods that make the most sense for your project goals.

By calculating property values, you’ll know how much the property is worth when you sell it. In return, you’ll know how much you should spend to acquire the property and flip it.

#1 Determine the After-Repair Value Using Sales Comps

The After Repair Value (ARV) of a property represents the estimated retail price once it’s renovated. By determining the ARV of a property before purchase and renovation, you’ll know how much you can sell it and see if it’ll generate enough profits.

Now, the easiest way to figure out the ARV is by analyzing comps. To run comps, check similar properties within a quarter to half-mile radius. Identify at least three properties that have sold in the last six months that are comparable in size, type, features, and year built to ensure the most accurate valuation of your potential commercial property.

Next, calculate the average price per square footage of the comps you’ve identified. See how much per square foot they cost, and use that rate to estimate how much your property can charge. Here’s the formula for determining the estimated ARV using comps:

ARV = Average Price per square foot of comps multiplied by the square footage of your property

$1,440,000 = 120 per square foot x 12,000 square feet

In the above example, your commercial property will likely sell for roughly $1,440,000. Is that enough, considering how many renovations you’ll do? Determining the ARV allows you to decide if the property will generate enough returns for you to make a flipping profit.

#2 Capitalization Rate

Capitalization rates (or cap rates) allow you to estimate the return of investment (ROI) of a property. Your buyers will use the cap rate formula to see how much they’ll earn in relation to how much they’ll spend to purchase and operate the commercial space. The higher the cap rate, the more the buyer can earn from it, the more you can potentially charge for the commercial property.

Here’s the cap rate formula to see how much income the property will bring to the owner per year:

Cap Rate = Annual Net Operating Income divided by Price or Value

10% = $150,000 / $1,500,000

There’s no one ideal cap rate because there are a lot of factors that affect a property. However, analysts say a “good” cap rate is around 5% to 10%. Anything below that range is a less risky investment, as it’ll take more time to recover the investment cost—buyers wouldn’t want that, and neither should you.

#3 Estimate Flipping Costs

When planning a renovation, it’s essential to get an estimated repair cost (ERC) so you don’t go over budget and deplete your margins for good flipping profits. After all, no buyer is going to invest in an overpriced property, even if you’ve added all the best features and used the best materials.

To get the ERC, obtain cost projections from professional inspectors and establish a range for the total expense. Don’t just work with one inspector, too. Like how we’d get second opinions from doctors, get multiple opinions from inspectors to have a clear view of the rehabilitation spent.

Here are some tips:

  • Two estimates: Ensure that contractors take unforeseen repairs into account. They should also give two price scenarios, so there are fewer surprises during the flipping process.
  • Accountability: Hold all subcontractors accountable for the prices they provide. Don’t allow them to change mid-way, or it defeats the whole purpose of estimating your flipping costs.
  • Final walkthrough: Conduct a final check with each subcontractor. Double check to ensure that they didn’t leave out any potential cost overruns that’ll dig you into a financial hole.

Unless you’re a contractor yourself, work with licensed contractors to get detailed breakdowns of the cost and a timeline to finish the project. Doing so will ensure that you have a comprehensive budget in place and an accurate timeline that makes sense with the market behaviors to maximize your profits.

Repositioning Commercial Properties for Excellent Flipping Profits

With the expectations that office rental vacancies are going down this 2023, it presents an opportunity for investors to take that leap and flip. Still, it’s crucial to make informed decisions about which properties are worth putting your time into to reap the rewards and avoid the pitfalls of a hasty investment.

There are still a few risks when it comes to investing in commercial real estate (or any investment for that matter), but you can challenge the curve by doing your research and preparing before any purchase. Reposition them if necessary to meet the market’s demands!

Ultimately, choose the right property, anticipate the possible renovation costs, and read the market’s behavior, and you’ll maximize your profits in the end.

Are you interested in flipping commercial real estate and want to know more about it? Join us as a REIA member and attend our upcoming meeting! We also have a newsletter, so you’re never out of the loop.  

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Flipping

Netflix & Flip: 5 Best House Flipping Shows to Watch in 2023

Source: Nolan Issac from Unsplash.

House flipping is all the rage right now. We all love them, whether we’re expanding our house-flipping portfolio or watching home renovations for fun. There’s nothing quite like seeing a run-down house turn into a beautiful home.

If you’re looking for some inspiration, here are a few of the best house-flipping shows of all time. You might even pick up a few pro tips that you can use in your house-flipping projects down the road.

#1 – Holmes Family Rescue

Does the name Holmes sound a bit familiar to you? You might have heard about Mike Holmes from Holmes on Homes. Holmes Family Rescue is a new show that now includes Mike’s son and daughter.

A Canadian series that debuted in 2021, it follows dissatisfied homeowners whose properties were ruined by low-quality construction.

Luckily, they’re saved by Mike Holmes, a general contractor, along with his 2 kids, who are home renovation experts, Michael Holmes, Jr. and Sherry Holmes. As a family, they show empathy and commit to their mission, “Make it right.”

If you’re not a big fan of the glamorized version of house flipping, then Holmes Family Rescue is the show for you. This show is a great option if you want to learn more about repairs and renovations.

In each episode, Mike, Michael, and Sherry show the substandard work done on the property and explain in detail how they should have been executed correctly. They also talk with the homeowners, asking them to describe their experience with the original contractor and how it affected the way they live now.

Holmes Family Rescue currently has 1 season and is renewed to have another season and will premier in the spring of this year.

Watch Holmes Family Rescue on HGTV.

#2 – Stay Here

Streaming giant, Netflix, is also riding the house-flipping trend with Stay Here.

In this reality show, you follow along with interior designer Genevieve Gorder and real estate broker Peter Lorimer. In each episode, the duo gives serious TLC to a short-term rental home, transforming it into a moneymaker for its owner.

One of the best things about the show is that it features unique vacation rentals, including a houseboat in Seattle, a firehouse in Washington, and a brownstone in Brooklyn.

Apart from remodeling these, Genevieve and Peter also provide viewers with updates on real estate industry trends, as well as advice about finding success in this line of business.

Currently, there’s only 1 season. Although, fingers crossed because there are rumors that season 2 will be released in August of 2024.

Watch Stay Here on Netflix.

#3 – Home Town

If you’re interested in learning what it takes to remodel historic properties, then Home Town is the house-flipping show for you.

It features Ben and Erin Napier, a husband-and-wife team restoring beautiful Southern homes in Mississippi using up-cycled materials to retain the property’s old rustic charm.

The couple is known for infusing their clients’ characters into the homes they remodel.

For example, one episode featured a local restaurant owner looking to settle into a cozy cottage with her grandmother. They ended up with a custom-built rolling kitchen island and a handmade raised garden bed. Both of which were inspired by their personalities.

If Home Town leaves you wanting more, I have some good news for you. They also have a spinoff called Home Town Kickstart.

Watch Home Town on HGTV and Home Town Kickstart on HGTV.

#4 – Designed to Sell

Want awesome tips and tricks that will help make your properties sell?

Sit back and tune in to Designed to Sell, a show where each 30-minute episode features a home that has sat unsold on the market for a long time. Real estate experts and general contractors are then given $2,000 to renovate the property to the best of their abilities.

Because of this limited budget, this show is perfect for flippers who want creative design ideas while getting the most bang for their buck.

It also highlights the country’s most cutthroat real estate markets—Los Angeles, Chicago, Atlanta, and Washington, D.C. Unfortunately, Designed to Sell ended; although, there’s still a backlog of episodes to enjoy.

Watch Designed to Sell on HGTV.

#5 The Flipping El Moussas

You might know Tarek El Moussa from Flip or Flop. Unfortunately, Tarek and his past partner have broken up and gone their separate ways. Although Flip or Flop is still a must-watch if you haven’t seen it, we’re moving forward to the next reiteration of the popular program.

Tarek is now married to Heather Rae, a famous real estate agent from the Netflix series Selling Sunset. Together, they’re a power couple who are experts in their own fields. They’re unstoppable with Tarek’s experience in flipping homes and Heather’s eye for high-end real estate.

In the first episode, Tarek and Heather take on their first project together. It’s not an easy ride because there are already some issues with the odd floor plan and uneven floors. But, are their combined knowledge and work experiences enough to conquer this issue?

This show is so new that it just aired this year. Follow along their journey as they expand their business (and family) together.

Watch The Flipping El Moussas on HGTV.

What Else is on Your Watch List?

House flippers need to stay updated with the real estate market to earn profits and with the current design, and trends to create appealing homes. And there’s no better inspiration than the hit shows we’ve listed above. We’re sure there’s at least one series for you—whether your niche is in historical homes, vacation rentals, or luxury properties.

What other house-flipping shows have you enjoyed? Is there anything on your watch list that we didn’t include here? Let us know in the comments—we’d love to hear from you!

And become a member today to join our upcoming meetings and receive our newsletter. You’ll get insider knowledge and learn from experienced flippers in the industry just by being a part of our group.

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Flipping

the Flipping Forecast for Detroit in 2023 and Beyond

A kitchen after a flipper renovation.
Photo by Aaron Huber

During the height of the pandemic, the real estate market took a big hit. Large markets like New York felt a significant decline in pending house sales, with a hefty 58% decrease. And in our case, the City of Detroit took an even more severe hit, losing 74% of pending sales.

However, when stimulus packages started rolling in during the latter half of 2020, housing sales came back with a caveat. For example, list prices spiked 27% due to the revived increase in demand. This is bad news for house flippers, as finding good deals is significantly more challenging.

Still, with the pandemic in the rearview mirror, it’s time to look at how the real estate market is shaping up in 2023. And more importantly, is it a good time to build your home-flipping portfolio this year?

Real Estate Trends for the City of Detroit, MI

To try and curb inflation, the federal reserve is looking to increase interest rates across the board.

Just this February, interest rates are up and are expected to keep rising in 2023. That being said, inflation is still going strong. We’re looking at incremental interest rate increases throughout the year.

This results in a more challenging time for house flippers to get financing for their flipping project. To give you an idea of how the real estate market looks in the city, here are some trends we’ve observed:

  • Days on the Market: On average, properties stayed on the market for 36 days as of November 2022. It’s an improvement from the earlier half of last year’s average of 44 days on the market. Flippers might have an easier time selling their flips because buyers are more willing to buy.
  • Average Home Price: Compared to June 2021, home prices increased by 38.3%, from $72,500 to $100,205. The increase means house flippers like you might see lower returns on investment because buying a house requires more capital.
  • Average Sale Price: The average sale price of a Detroit property is identical to its average home price and set a new record by surpassing the $100,000 at $100,250—an increase of 38.3%. This isn’t necessarily bad news, as you might earn a bigger profit when you sell your flip.
  • Number of Listings: The number of listings increased from 2021 to 2022 by 38.9%, going from $1,983 to $1,428. This figure means that you’re off to a good start, as there are more houses on the market that you can list as options.
  • Total Sales (Unit): The total sales took a hit in 2022, by -10.1%, from $424 to $383. Your flipping projects might fall through because fewer people are buying, so you need to prepare a good exit strategy , just in case.
  • List Price: In January of this year, the year-over-year home prices were at an increase of 6.7%, and the average listing home price was $80,000.

Despite the climbing interest rates, the Detroit real estate market continues to climb in price, and the economic outlook in the City of Detroit is shaping up to be moderately positive this 2023.

Of course, we’ll have to wait and see if the interest rate hike will affect the situation, but it seems like 2023 is still a great year for you to potentially expand and earn from your flipping projects—as long as they make sense for your budget and risk appetite.

Flippers should Approach the City of Detroit Market with Cautious Optimism in 2023

Despite society moving on from the issues we faced during the pandemic, real estate prices continue to skyrocket. Sure, there’s pressure for the federal reserve to implement schemes to ease inflation, but various other factors also affect the housing market.

Regardless of what happens, the City of Detroit is still one of the most affordable areas, with its median sale price of $100,205, which is around 4x lower than the US median sale price of $405,900.

You’ll continue to find hidden gems in the famed Detroit real estate market to continue building your portfolio. Just be careful and get into projects that are guaranteed success, which you can do by joining as a REIA member, signing up for our newsletter, and meeting other investors in our upcoming meeting.

Leave a comment below if you have any other thoughts about the forecast for 2023!

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Flipping

5 Tips to Flip a Really Old House (Challenging but Possible!)

The interior of an old home with aged wooden frames and dry leaves
Source: Mahdi Dastmard on Unsplash

Countless shows have entertained us with the possibility of flipping an old house (over 50 years old) for profit. It used to be simple, too: find a run-down house, fix it up, and sell it for easy money.

However, in today’s market, flipping a house has become much more challenging. Properties are increasingly more expensive to buy and fix up, and more and more wholesalers vie for the same investors.

And everything is exponentially more complicated if you flip an old house—the lower the starting point, the rougher the road is to flipping success.

So how can you flip an ancient house? Here are five critical tips for house flippers to remember.

1. Pick a Home in an Excellent Location

You can change everything about a house except for its location. So pick a home in a good neighborhood, often categorized by its amenities (e.g., near schools, public transportation, etc.).

No matter the potential you see in an old home, never choose one close to the freeway, with a high crime rate, or anything unappealing like that. Nobody wants a pretty property that’s in a terrible location. Instead, purchase a home in a prime location, and you’ll appeal to many potential buyers.

2. Check Your Numbers, and then Check Them Again, & Maybe Again!

How much is the house worth? How can you get it under the market value so you’re making money right off the start? Moreover, how much will it cost to bring it up to a sellable standard?

Knowing your numbers is vital in all real estate investments, but it’s especially crucial to flip an old home.

If you’re not experienced in answering any of the questions we’ve mentioned above, you’ll need to hire these professionals:

  1. Real estate experts to know the estimated property value
  2. Contractors or inspectors to determine the estimated renovation costs (ERC)
  3. Real estate agent or broker to determine the after-repair value (ARV)

These professionals will help you flip an old home, especially given how tricky it is to renovate and know the value of a subpar property; doing things yourself might lead to underestimating or overestimating the cost and value, which could put your entire investment at risk.

3. Understand What Needs to be Done—and What Really Doesn’t

A home inspector can help you understand what needs to be fixed in a house before you sell it. Oftentimes, old houses need work in these areas:

  • Outdated outlets and electrical systems
  • Outdated heating systems (HVAC units)
  • Obsolete plumbing systems
  • Foundation issues
  • Deteriorating roof
  • Hazardous building materials
  • Old windows and door frames

These structural issues are called the “bones” of a house because they’re essential parts that make up the structure and safety of the property. You can get away with ignoring other cosmetic details like paint colors or flooring when flipping an old house, but you absolutely cannot ignore the bones. If any of these areas are not up to code or need significant repairs, it will be especially difficult (and expensive) to fix before selling. Contract a professional inspector to confirm the condition of an old home before you buy to stay in the clear.

4. Find Reliable and Honest Contractors for Repairs

Once you’ve bought the house and know what needs to be fixed, it’s time to find a contractor.

A lot of people try to save money by hiring an unlicensed contractor, or by avoiding getting  multiple bids from different contractors. As a result, they often overspend on repairs or end up with a subpar repair job. Cutting corners can cost you thousands of dollars and cause significant delays in selling the property.

Find a good contractor by following referrals from friends, family, or other real estate investors who have flipped homes before. Once you have a few referrals, interview each contractor, get multiple bids, and check their licensing and insurance.

Here are the two categories of contractors you’ll choose between:

  • General contractor: If you choose a general contractor, you’ll only have one point of contact who’s in charge of managing the entire project from start to finish. A general contractor should be someone who is capable of managing every step so you can trust them the entire way.
  • Subcontractors: If you choose to go with subcontractors, you’ll do the overall managing yourself and have a group that includes electrical, plumbing, HVAC, framing, insulation, painting, and flooring professionals. You’ll also need backups to these roles so you’re never left hanging if one subcontractor calls out sick.

A good contractor is honest about the repairs that need to be done, gives you a fair price, and has a good reputation. Don’t be afraid to negotiate with contractors—remember, it’s your money and your investment, so you should feel confident in getting the best value for the repairs.

5. Build More Time than Usual Into Your Timeline

Old homes usually need major modifications and there’s bound to be a surprise or two!

You may need to redo narrow staircases, hallways, and doorways. Moreover, you’ll likely have to take down walls and rearrange the layout to modernize the old home by creating larger living spaces.

You’ll likely touch every part of the house—the electrical, plumbing, framing, and more—and you’ll need to strictly stick to your timeline to cover all the necessary steps. You don’t want to skip, delay, or rush any of those steps, either, (like installing drywall to see immediate improvement) because the structure or “bones” is what truly makes the property valuable.

Essential renovations take time and careful planning; don’t get too excited with the finishing stage.

Instead, plan ahead realistically, stick to your timeline, and schedule when each subcontractor should start their part of the project (if you’re not using a general contractor). You’ll make much better use of your time without sacrificing the quality of the finished property.

House Flips for Huge Profits: Old Homes for New Money

Have cautious optimism when flipping an old home. As long as you understand what you’re getting into before making an offer, lend your due diligence to inspections and contractors, and have a solid plan for repairs, you can make a tidy profit by flipping an old home.

Do you need more help flipping old homes? Sign up as a member, subscribe to our newsletter, and join us in our upcoming meeting! Stay updated with the latest tips and tricks by joining a community of like-minded individuals for your real estate investment journey.

See you in the winner’s circle!

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Flipping

Flip Responsibly: 8 Legal Risks You Must Know About House Flipping

Source: Zillow listing in the City of Detroit

We get it. It’s scary to get into real estate investing, especially if it’s to flip a home.

Countless shows have “proved” flipping to be easy, but the reality is much more challenging. As a house flipper, how much money should you spend on the renovation? How fast do you have to complete it?

And, most importantly, how can you flip a house legally?

Well, you must know eight legal risks when doing house flips. You may be in trouble if these aren’t handled properly, so we’ve outlined the most crucial house-flipping legal risks below.

Risk #1: FHA Re-Selling Restrictions

The Federal Housing Administration (FHA) is the largest mortgage insurer worldwide and gives mortgage insurance for loans made by approved lenders. Unfortunately, the FHA also places several restrictions on its mortgages, which limit how often a home can be bought or resold.

For example, known as the “anti-flipping rule,” you must wait at least 90 days before selling or flipping an FHA-financed home. Moreover, any resale between 91 and 180 days where the new property price exceeds its previous price by more than 100% will need more documentation for the FHA.

Risk #2: Building Codes and Zoning Regulations

Ensure that the property you buy complies with all local building codes and zoning regulations. Failure to do so can result in costly fines for both the buyer and the seller. So, take your time researching local laws to stay updated with any changes in any area before flipping a house.

Risk #3: Right of Rescission Rules

Be aware of any “right of rescission” rules that may apply in your jurisdiction when transferring property from one party to another. These legalities can vary by state, but they provide rights and protections if a homeowner wishes to back out of an agreement within three days of signing the contract.

Risk #4: Real Estate Contracts and Disclosure Statements

It goes without saying (rather, we wish it could) that you should understand the contract that you’re signing when purchasing a property. Read through the entire thing carefully and ask questions if there are any items that aren’t clear.

What novice flippers might miss, however, are the disclosure statements that must be included in real estate transactions, like lead-based paint disclosures or radon gas disclosures. Not complying with these regulations can result in fines and lawsuits against your flipping business, so always double-check.

Risk #5: Financing Fraud

Document everything thoroughly when financing a flip project. You’ll want to do this because lenders are tightening up, most notably regarding mortgage fraud and loan misrepresentation.

Refrain from misleading them about your financial situation to secure financing for a property, as failure to disclose all necessary information can lead to serious legal repercussions. And once again, fully understand the terms and conditions of any loan you take out.

Risk #6: Fair Housing Laws

Fair housing laws protect buyers from discrimination based on race, religion, gender, or nationality. As a flipper, you must abide by these laws and never discriminate against potential buyers when marketing your flipped home. If found in violation of this law, you risk heavy fines and even jail time.

Violations include, for example, sending out a direct mail advertisement for a home featuring only families with young children and not mentioning any other age groups or demographics—it’s considered discrimination.

Risk #7: Mortgage Loan Fraud

Chances are, you don’t have enough cash on hand to purchase your property. So, you’ll likely involve banks and lenders to finance your project.

Lending can become a cycle: you take out a mortgage to purchase the home, the next buyer acquires their own mortgage to buy the home from you, and so on. That cycle becomes ripe for mortgage loan fraud, where the buyer misrepresents their financial situation to get a larger loan.

To avoid fraud, request proof of income and other documents when dealing with buyers. You can also use third-party services that review potential buyers’ credit scores and verify their employment history before they purchase the home from you. These practices will help protect you from any fraudulent activities.

Risk #8: Issues With the Property Title

You may notice a lot of affordable properties in the market to flip for a significant profit. But between lenders, borrowers, real estate agents, and more, it can be challenging to know who owns the property you’re looking to flip—who can legally sell it to you.

So, before you acquire any property, ensure that you have title insurance to verify the title’s status on your behalf, and do your due diligence before making any major decisions. As much as possible, you should avoid dealing with fraudulent titles or legal disputes that could arise from a previous owner.

House Flipping With No Legal Repercussions

House flipping can be an incredibly lucrative business venture. By understanding these legal risks upfront, you’ll be in a much better position to have a large profit margin when entering this endeavor.

Just remember: consult with a local attorney if you have questions or concerns prior to doing any real estate transaction. Ensure that everything is done in accordance with all applicable laws and regulations to truly (and surely) build your house-flipping empire .

Do you need more help in house flipping? Join as a member, subscribe to our newsletter, and attend our upcoming meeting to stay updated with the market. You’re only as strong as those around you!

Categories
Flipping

Taxes Made Simple for House Flippers

Source: Zillow

House flipping is a popular real estate investment strategy in which investors purchase properties, usually at a significant discount, fix them up and then resell them for a profit.

While the practice has been around for decades, it only gained popularity recently, particularly in the wake of the housing market crash of 2008, when many homeowners lost their homes to foreclosures—leading lenders to sell for cheap, and investors to buy rundown homes to rehabilitate and sell at profit.

Still, interestingly, house flipping is not just for professional real estate investors. Anyone can be a house flipper with the right knowledge and drive. In fact, many first-time investors have found success in this niche market—we’ve seen it happen.

If you’re thinking about getting into house flipping, there are a few things you need to know about the tax implications of this type of investment. Check them out below.

1. Document Every Expense!

As with any other investment, you must keep good records when flipping houses.

This will help you in two ways:

  • Doing so will make it easier to calculate your profits (and taxes owed) when you sell a property.
  • It will give you the documentation you need if the IRS audits you. As you can imagine, flipping houses can generate a lot of documentation, so it’s essential to have a sound system for organizing and storing your records.

2. Expenses to Deduct During Tax Time

If you’re flipping houses, there are a ton of expenses you can deduct when it comes to tax time.

There are two main types:

  • First, just about everything you spend buying, fixing up and selling the property.
  • Secondly, your business expenses, like auto payments, gas, for your auto, computer stuff, marketing the property, even snacks you buy for the contractors!

Say you spend $10,000 repairing and renovating a house that you sell for $50,000. In this case, you can deduct the $10,000 in expenses from your profits, leaving you with a taxable gain of $40,000.

3. You’ll need to pay capital gains tax on your profits.

When you sell an investment property, you must pay capital gains tax on any profits you earn. Capital gains tax is simply a tax on the profit you realize from the sale of an asset. In the case of house flipping, your asset is the property itself.

The good news is that there are ways to minimize your capital gains tax liability.

For example, if you hold the property for more than one year before selling it, you will be eligible for the long-term capital gains tax rate which is generally lower than the rate for short-term gains. Additionally, you can take advantage of certain deductions, such as the costs of improvements made to the property.

4. You may be subject to self-employment tax.

Another issue you can face is if you’re flipping houses as a business venture—then you may be required to pay self-employment tax on your profits. Self-employment tax is essentially Social Security and Medicare tax for the self-employed. The current rate is 15.3% which includes the employer and employee portion of the tax.

However, there are circumstances under which you may not be required to pay self-employment tax.

For example, you may not be subject to this tax if you’re flipping houses as an individual investor (rather than through a business entity). And if your total income (including your flipping profits) is below the self-employment tax threshold ($400 for 2019), you will also be exempt from paying this tax.

Of course, nobody is going to flip a home for a mere $400. But you get the point.

5. You can avoid capital gains tax via a 1031 Exchange.

Let’s suppose you’re looking to reinvest your profits from a house flip into another property. In that case, you can do so without paying any capital gains tax by taking advantage of the 1031 exchange provision. This provision allows investors to defer their taxes by rolling their profits into a new investment property.

For example,  if you sell a house for a $50,000 profit, then you can use that money to purchase a new investment property without paying any capital gains tax on the sale.

The negative of doing a 1031 Exchange is that you can’t use any of the funds from the sale to live off of.

6. Other taxes depend on your location.

In addition to federal taxes, you may be subject to state and local taxes on your house flipping profits.

These taxes will vary depending on your location, so it’s important to check with your state and local tax authorities to determine what you’ll owe. For example, in some areas, you may be required to pay transfer taxes when you sell a property.

7. You may be required to pay estimated taxes.

Next up, if you’re flipping houses as a business, you may be required to pay estimated taxes on your profits. Estimated taxes are periodic payments made to the IRS throughout the year, based on your expected tax liability for the year. They’re due yearly on April 15th, June 15th, September 15th, and January 15th.

If you fail to make your estimated tax payments, you may be subject to penalties and interest. Therefore, staying on top of your estimated taxes is crucial if you’re flipping houses as a business.

Uncomplicated Tax, Uncomplicated Profits

We hope this quick overview gave you a better understanding of the tax implications of house flipping.

As with any type of investment, it’s important to do your homework and consult with a tax professional before getting started. But if you’re looking for a lucrative investment opportunity, house flipping may be just what you’re looking for.

Maximize your flipping profits today! Join as a REIA member, attend our upcoming meetings, and sign up for our informative newsletter. We can help you take care of all the details, from repairs and renovations to accounting and taxes.

Categories
Flipping

Increase Flipping Power: How Financing and Loans Work in House Flipping

Source: Zillow listing as of August 2022

Most house flippers don’t have the cash themselves to purchase a property & renovate it outright, so many have to learn how to acquire loans. But if you’re new to house flipping, securing financing may seem daunting.

So the question is—where do you start?

We’re here to help guide you through the process of financing your first flip. Here are the 4 steps to getting a loan for house flipping, so you know how to get one yourself.

1. Determine How Much to Borrow

The figure differs for every individual and investment. Generally, it’ll depend on your current purchasing power, the property’s purchase price, and estimated repair costs (ERC). If you’re new to house flipping, we recommend you work with a trusted and experienced inspector to have accurate numbers.

Once you know the total amount necessary, decide on what type of loan to get.

2. Decide on the Loan Type

Now, different types of loans are commonly used for financing a flip. However, if you want to play it safe, the most common loans are conventional, hard, and private money loans. Here’s the low down on a few different loan types:

Conventional Loans

Conventional loans are usually the best option if you have good credit and can qualify for a traditional mortgage. The interest rates on conventional loans also tend to be lower than other types of loans, making them more affordable in the long run. The only negative is that the property must be in livable condition, which doesn’t lead to the best deals.

Hard Money Loans

Hard money loans are typically easier to qualify for than conventional mortgages, but they come with higher interest rates. Hard money lenders will also often require that you have some skin in the game by putting down a higher down payment or using your own personal funds for the renovation.

Private Money Loans

Private money loans are given by private individuals or investors instead of banks or other financial institutions. Because of that, they usually have more flexible lending criteria than traditional lenders, making them a good option for borrowers with less-than-perfect credit. However, they take higher interest rates and fees.

3. Shop Around for Lenders

Once you’ve decided which type of loan is best for your financial situation, it’s time to look for lenders. You can find lenders online, through a local chamber of commerce, or by talking to other flippers in your area.

When you’re comparing different lenders, pay attention to the interest rate and fees associated with each loan. You’ll also want to ensure that you’re comfortable with the repayment terms. Some loans may have prepayment penalties which means you’ll owe a fee if you pay off your loan early.

4. Apply for the Loan

Finally, you’ve found a few lenders that you’re interested in working with; it’s time to start the application process. The first step is to fill out a loan application. You’ll need to provide information about your financial history, as well as the details of the property you’re planning to flip.

After you’ve submitted your loan application, the lender will review your information and decide whether to approve your loan. If your loan is approved, you’ll be given a loan estimate that outlines the terms of your loan, including the interest rate, monthly payment, and repayment schedule.

Take your time reviewing all options, sift through the best ones, and accept the one that gives you the best terms. Don’t accept loans haphazardly, or you’ll dig a financial hole before you even start flipping.

Expand Your Purchasing Power with Flipping Loans

You’re now ready to shop around for the best deal on financing your next flip!

As you can see, using a loan is much better than using cash, as it increases your flipping power. Even if you’re a seasoned flipper and have a ton of cash on hand, you still want to increase your deal flow as much as possible to flip more properties. Loans allow you to work on bigger and better projects—even multiple projects at once—without tying up all your own cash in them.

And if you need more help, don’t hesitate to join as a member of REIA today and attend our upcoming meeting. You can also sign up for our newsletter so you never miss any important tips to become a successful house flipper.

Categories
Flipping

5 Easy Ways Flippers Can Spruce Up the Lawn Before Sale

Source: Curbed

Are you getting ready to flip a house? If so, it’s important to make sure the outside looks as good as the inside.

After all, no one wants it to look like a neglected eyesore or it will scare away any potential buyers. And yet, you have to strike a perfect balance because you don’t want to spend too much time or money on it either.

In the house flipping industry, time is money—the longer you spend remodeling the property, the less profit you earn. Landscaping tends to eat up a ton of time and effort, which means that if you’re investing in long-term lawn care, you’re not flipping fast enough.

On average, flippers spend between 5 and 10% of their budget on landscaping. This may not seem like much but you’d be surprised at how much value this brings. In fact, studies have shown that sprucing up the lawn can increase the home’s value by as much as 20%.

That’s a lot of additional profit for each flip. But this isn’t the only reason why you should invest in landscaping. Keep in mind that construction work to renovate other parts of the property will likely mess up the yard, so much so that you might need to redo the entire lawn.

So, let’s take a closer look at how you can effectively spruce up the lawn without going over budget.

How to Spruce Up the Lawn Without Breaking the Bank

No flipper wants to dedicate a huge swath of their budget to landscaping. So, here are a few cost-effective tips for you to improve the lawn without going over budget. The goal is to ensure that the home will attract potential buyers—notably, the target market that you want to reach.

1. Remember Your Audience

Before going crazy with your landscaping to-do list… first, consider what your target buyers will want. For example, if you’re hoping to sell to an older group of people, then perhaps it would be better to not have a lawn at all since they may not want to regularly maintain it. Young professionals, however, would likely opt for a patio or outdoor deck to entertain their friends, rather than a high-maintenance yard.

But if you’re targeting families, then feel free to go level up the landscaping. Chances are, these buyers are prioritizing wide open spaces for their kids and pets to play in. In fact, not having a poorly-maintained lawn may turn them off from seriously considering your property.

Apart from your target buyers, also consider what real estate class the neighborhood, tenant pool, and property belong to. For instance, it won’t make sense to create a beautifully-landscaped lawn for a Class C home since an expensive feature to maintain would be the last thing its tenants want.

2. Make the Grass Greener

A well-manicured lawn and tidy garden can go a long way in boosting your property’s curb appeal. The grass, in particular, has the most visual impact on guests when they first see the house.

Simply adding either fertilizer or grass seeds can go a long way. In fact, do this the minute you start on the flipping project. That way, the grass will already be fuller, healthier, and much greener by the time you’re finished and ready to sell.

As tempting as it is to constantly mow the lawn, it actually puts stress on the grass, especially if you trim off more than 20% at once. So check the cutting height of your lawn mower before turning it on and going to town with it, and ensure that you’re not mowing the grass too often.

This shouldn’t stop you from regularly pulling out the weeds, though. After all, who wants to see an overgrown lawn?

3. Edge the Lawn

If you want the lawn to appear tidier to potential home buyers, use an edger to trim the grass along its perimeter. Doing this creates a crisp and neat border that will make your property look cleaner and more professional, undoubtedly increasing its curb value.

Edging can also highlight landscaping design elements, which is important if you want to draw a buyer’s attention to a particular area of the lawn. It also prevents weeds and turf grass from growing into flower beds, so you no longer have to worry about the aesthetic appeal of your blooms.

4. Don’t Forget the Grass Clippings

For many, grass clippings are sent straight to the garbage can. But for flippers, they’re heaven-sent. Rather than bagging them after mowing the lawn, leave them where they are. Since they’re small and comprised of mostly water, it won’t take them long to break down and fertilize your garden.

However, make sure to clean up the grass clippings from your driveway, the sidewalk, and the other hard surfaces surrounding your lawn.

5. Invest in Lawn Repair Mix

You can easily fix bare patches on the lawn with a lawn repair mix, which typically consists of compost, fertilizer, and grass seedlings.

For better results, remove the dead grass and loosen the soil until at least three inches below the ground. This will give the lawn repair mix enough space to grow. Take care not to overwater this spot to prevent the seeds from scattering.

Sprucing Up the Lawn Won’t Break Your Budget

As always, the goal is to create a lawn that fits the criteria for selling that particular property to a particular target market. You don’t want to spend too much time, effort, and energy on a project that won’t pay off. In all flips, the faster you sell it, the more money you’ll get to keep, so make sure that your remodeled lawn will help you earn the profits you want.

In this article, we proved that landscaping projects aren’t as scary, expensive, or as time-consuming as you think they might be. With just a few easy fixes, you can increase your flipping profits without spending too much time and effort beautifying someone else’s lawn.

For more house-flipping tips, reach out to our team of experts at Logical Property Management. We’ve been serving the Metro Detroit real estate market for more than two decades now, and have everything you need to succeed in the area.

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