Are you interested in Flipping Houses?
I grew up in a construction and building environment where my father has either bought, remodeled or built about 75% of the homes in the small town he lives in (about 7,000 population). I have had the privilege of working with him and I have seen him put in 14-15 hour days and be available to people in need whenever they call him. I have learned a great deal from my father and I'm so very thankful for this.
One of the things I have watched my father do time and time again is buy real estate. I can only remember back in time to the 70's, 80's, 90,s and now in the 2000's where he has continued to purchase real estate. He has purchased just about any type of property, many residential homes, commercial buildings, trucking companies, entertainment establishments, historical and museum property, and just about everything inbetween, including an old barn he has turned into his workshop which is about 60'x80' in the middle of town!
Each time he has purchased, he always makes the comment to me that you make your money on the front end of the real estate deal not the back end. You must buy the property right! Now what does buying right mean? It means you need to factor all your costs into the real estate investment property, add a cushion factor and don't forget to add your time and the time value of your money into the equation.
Here in Johnson County, Kansas, there seem to be an unlimited number of investors purchasing real estate. So with so many of these investors, it is very difficult to purchase properties right in Johnson County, Kansas! There are so many investors out there that think they can purchase a property that has about $10-15,000 of room in the price to value that they can buy it and do a little paint and carpet and turn it. They fail to figure in all the costs associated with the purchase.
Here's a list if items you should look at closely before trying to purchase and flip a home.
- Adequate repair costs (you should estimate high, then add another 15%)
- Unforseen repairs. How do you avoid this. Have an expert review the property with you. There is a reason the property is priced the way it is. Sometimes this may mean you take more than one expert to review the property with you.
- Resale costs. Realtor fees should also be considered. Even if you are able to sale the home on your own, you should figure this cost in.
- If you are a novice at home investing, find someone who has experience in this kind of business and offer to work with them to learn the business. This might seem odd at first, you might be saying, why would an experienced rehabber be interested in helping another person in the business. Well, sometimes they are looking for someone who has a line of credit they can utilize in order to continue to purchase homes. They may be purchasing to rent not to sell. This really isn't as odd as it may sound. In fact if you are looking for someone, let me know.
- Be aware of the hazardous materials in a home, this could be a very big expense to eliminate.
- Be cautious of homes with major foundation issues. Unless you have a foundation repair man who is willing to be a part of your remodel, this issue is a real killer for buyers.
- There are several other areas to consider, but I think you get the idea.
In fact, I'm sure this list can be expanded, so if you have additional thoughts, let me know and I will add them.
I think that in the current market, it is best to try to find properties that you can purchase right, fix up and rent out. You can build yourself a nice income by doing this over trying to flip homes, especially in this market. Some of you may disagree with this, but the property values are a bit depressed currently (a good buy market) and the number of homes on the market are at an all time high, plus the days on the market are high in comparison to the same month in past years.
So what do you think! Do you agree or disagree? Why?
David L. Britt, MBA
Olathe, Kansas
David L. Britt Real Estate
Heritage Real Estate
The Heritage Real Estate Team
Olathe Neighbors 
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