A few years ago, it was common in many markets for real estate investors to buy houses, update or repair them to bring them current to buyer's tastes, and sell at a profit a few months later. For most markets, those days are gone. The problem with flips (and flippers) is that they were primarily in the get-rich-quick game, which may work for a while, but doesn't last forever. You can still make money by applying some of the principles touted on HGTV, TLC, and the like, but it's a slower path to your payday. I call this strategy a "slow flip".
Traditional flippers were not just finding properties that NEEDED to be repaired or updated, they would also over-improve properties that had nothing wrong with them. This approach is not going to be as profitable now, so it's best to stick to the properties that NEED to be updated or repaired. You know the ones I mean, the kitchen and bath floors have peel-and-stick tile flooring, the kitchen appliances are avocado green or harvest gold, where wallpaper is present, it's dated, stained, peeling at the edges, or all of the above.
Ideal candidate properties can be found on the foreclosure market, but know your limitations before deciding whether you want the house that needs repairs or the one that just needs updating. If you're comfortable doing the work yourself, that's one way to build sweat equity, but realize it will take much longer than you originally estimate (no matter what) and you must be prepared to do the job right, this isn't something you're going to unload on an unsuspecting stranger in 3 months. The difference in a slow flip, is that you
- purchase,
- repair or update,
- move in yourself for at least two years or longer (to avoid capital gains taxes),
- then sell (or rent out for up to 35 months before selling to realize additional appreciation with time and still avoid capital gains taxes).
In my next post, I'll explain more about finding the right property for you.
For answers to all your housing questions in Hampton Roads,
Contact Drick Ward - Exit Realty Central
757-227-9007
;)
;)
We employ this tactic personally and are making a new move soon. I hate moving but our mortgage balance shrinks every time by applying our old equity.