Beware of "FLIPS"

By
Mortgage and Lending with Your IRA guy!

Reasons to beware of flips

This sounds like a funny article for me to write because I buy and sell properties-sometimes fairly quickly (known as FLIPS) but you need to take an extra look at a home if you know you are buying a "flip" property.

Not to say that all or even most investor rehabs are shoddy, but it is something to keep in mind if you are interested in buying a home you suspect may be a flip.  

Most investors are out for a quick make over to get to the cash from the sale.  For this reason, it is important to have a thorough home inspection. 

  • Use a professional inspector, not a friend or relative just because you trust their opinion or because they own a home.
  • Pay extra if necessary to have the inspector crawl through the attic, basement, and crawl spaces. 
  • Go with the inspector so he can show you first hand what he is talking about 

Now, there is nothing wrong with flipping.  Many investors do a fine job of returning distressed properties to useful life and there are many good deals out there right now. Just know what you are buying!  Go for a bargain if that appears appropriate, but don't be fooled by a slick job of cosmetic repair.

Buying a house that has just been renovated may look nice on the outside but, it may also just have a "pretty face"  Do your homework now or you could pay for it later!

Comments (5)

Ray Perry
CENTURY 21 The Neil Company Real Estate - Roseburg, OR
Realtor, CRS, GRI, e-PRO
Great advise for any buyer to take.
Jun 25, 2007 04:31 PM
Joseph Grabowski
Keller Williams Preferred Real Estate - Yardley, PA
REALTOR - 4saleinbucks.com

The way the current market is, unseasoned investors need to be very cautious when trying to FLIP a property. I would actually suggest that they thoroughly educate themselves and work with a REALTOR. Inceased days on the market, decreasing sales prices, wide variety of inventory, holding/carrying costs, and narrow profit margins are only the beginning.

I would like to suggest the book FLIP from the Millionare Real Estate Investor series. It has lots of practical, useful information, and even formulas to help someone who is thinking about buying distressed property to make a profit.

I get many requests from people asking me to find them homes that are "fixer-uppers" in nice neighborhoods. It seems that most of these people just got done watching an infomercial or one of these "Flip that House" shows on HGTV. It's not that easy.

For those that have no experience "flipping" homes, another good thing to do would be to buy the distressed home, fix it up, and rent it out for a few years before selling it. I know you wont get that instant gratification that these newbie flippers want or expect. But I think holding the property is a safer route, IF the profit margin is there. There is nothing wrong with long term investments.

Jun 25, 2007 05:24 PM
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate
Welcome to activerain. We look forward to hearing more from you. You will learn tons of great information. Good first post.
Jul 05, 2007 11:52 PM
Chris Griffith
Downing-Frye Realty, Bonita Springs, FL - Bonita Springs, FL
Bonita Springs Listing Agent
Welcome to Active Rain!  I see you've hit the ground running and I see Missy beat me in here, too!  LOL
Aug 22, 2007 10:43 PM
Michael Schindler
Your IRA guy! - Galesville, WI

Thank you Chris and Missy for the kind welcome!  Strange market huh!-especially in Minnesota (I'm on the border of WI and MN).

There are a lot of ongoing changes to most loan programs nationwide so, my recommendation is for houses that you have offers on, that you keep in touch with their mortgage person to make sure the programs your buyers are in will still be around.  Its not just the sub prime markets that are affected, guidelines are tightening across the board.  Right now, pre-qual letters aren't worth the paper they are written on.

 

 

Aug 23, 2007 02:43 AM