Interested in "Flipping" distressed homes?

By
Real Estate Agent with Keller William Realty Greater Des Moines

Many people are interested in "flipping" distressed homes for profit. Well, this has become more difficult. As investor pools have started to shrink a touch, so has the distressed home inventory. Current National levels are at about 14% of the market compared to about 24% at this time last year. Which was also down from about 30% the year before. Noticing a trend?

Now, that does not mean the ship has sailed. Much of this depends on the market you are in. For instance, we won't compare Detroit's distressed home market to Des Moines, Iowa, or even Des Moines, Iowa to Van Meter, Iowa - home of the mighty Bulldogs. That doesn't work.

It is best to consult a real estate professional as part of your business plan. They will be able to help you understand the conditions of specific areas so you can analyze your Return On Investment or Net Gain.

Create a simple spread sheet with;
the potential value of the home once it is in the condition after you have finished rehabbing. Subtract the intended purchase price of the home.
Subtract the perceived amount of materials and labor cost.
Estimate the time the rehab will take and subtract the appropriate holding costs, such as utilities, property taxes, and even your fuel to get to and from the job.

The list goes on, so pad your investment for errors. If you think it will cost $15,000, figure on $25,000. If you think it will take 2 months, estimate 4. You have to be prepared for the curve ball. Nothing goes as planned, so plan to alter the plan, it will save you in the long run, and keep you in business.

Identify a reliable, experienced crew that can gut, frame, and do the basics that keep your profit high. If you hire a remodeling professional to do the work for you, you'll likely net closer to zero, or worse. If you have your own crew, you are paying labor and material costs, but not the typical markup that we all use, after all, we're in business to make a profit, right? Hire specialists for specialty work (electric, plumbing etc...) but the cheep labor items like light demolition, yardwork and so on is the dirty work your crew can do that helps turn the profit.

Last, seek legal and accounting advise. Call your Realtor, your Attorney, and your Accountant. Oh, and make sure your Spouse is on board with your ideas = happy life.Distressed Graph

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