You want to buy a house, fix it up, and flip it for a profit. One problem... you've not yet done it before now. You have no experience fixing and flipping houses.
What do you do? Follow these steps....
1. Find a Realtor who has experience helping investors fix and flip houses. Now, this can be tricky. Many agents operate on the "fake it 'til you make it" process. You might ask an agent if she/he has experience with flips, and they will say, "Oh yeah, all the time", when they, in fact, have not worked with a single investor. I'm not saying that some Realtors lie; Some will just tell you anticipated truth. Ask for references... Ask to see listings of homes they have helped an investor buy, and the listing they used when they sold the houses.
2. Make sure you have plenty of cash in the bank, at least $100,000 minimum. I can show you neighborhoods around Woodbridge where you can buy a fix up house for $240,000, and sell it fully updated for $375,000. If you can buy the house all-cash and have cash left over for the repairs, go for it. If you want to finance your flip, the typical investor loan will require 20% cash down; That would require $48,000 down payment.
3. Write up a budget for fixing the house. Add the cost of repairs/upgrades/updates to the cost of the house, get the updated value from your Realtor, and determine if there will be PROFIT left over when you flip the house.
Here is a list of upgrades and repairs you will need to perform to fix-up the house for a flip:
Update the kitchen with new cabinets, counter tops, appliances, lighting, floor, and fixtures. $20,000.
Update the bathrooms with new tile, vanity, sink(s), lighting, and fixtures. $2,500 per bath.
Paint the walls a warm beige and the trim eggshell white. $2,500 - $4,000.
Replace the carpet, and/or sand and refinish the hardwood floors. $2,500 - $5,000
Replace the interior light fixtures. $250.
Clean and paint the utility room. $400.
If windows are old, replace them with modern windows. $7,000 - $9,000.
Paint and caulk trim. If house siding is wood or composite, be prepared to paint the siding. $750.
Remove/replace overgrown shrubs. $300 - $800.
Paint the front door and garage door. $50 - $300.
Replace exterior lighting fixtures. $200 - $300.
Replace door hardware. $120 - $200.
Carrying costs for 90 days. $4,425.
Bottom line is you'll invest $45,000 - $50,000 to update a modest 3 bedroom, 2 bath home in a prime neighborhood for first time buyers.
Costs of sale
Real estate fees, 3% of the price to your listing agent, and 3% to the Buyer Agent.
Recording fees, termite inspection, tax stamps, etc. 2% of the sale price.
Pretend you sell the house for $375,000 and you invested $50,000 in the house. Subtract $50,000 from $375,000, then subtract roughly $30,000 selling costs, your net would be $295,000. Back off your $240,000 purchase price, and you have a net profit of $55,000, for a return on cash out of pocket of 56%.
If you can buy a house for $240,000, fix it, and flip it for $375,000, and earn 56% on your cash, you've done well. I know neighborhoods in Woodbridge where you can do that. I have helped investors buy homes in those neighborhoods, and do very well.
I know a neighborhood in Mount Vernon where houses in original condition sell for $550,000. Those same houses updated sell for $750,000. That's a huge profit for a savvy investor like you.
4. When you make your purchase, keep in mind that you are buying and selling numbers; Don't get caught up in your emotions about any particular house.
5. Avoid the temptation to add more unnecessary updates as you move forward. Stick to your budget.
Do you want to know more about finding, funding, fixing, and flipping houses without getting burned? Text or call me, Erick Blackwelder, at 703-677-1120.