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Flipping houses profitably may not be easy, but it's far from impossible. With the right guide, you can avoid the risks and reap the rewards like a seasoned expert. Flipping Houses For Dummies is that guide.
The perfect blueprint to property resale, this book walks you through the absolute necessities of house flipping. You'll learn how to confirm that you have enough time, energy, cash, and resources to be successful. You'll also get an inside look at the house flipping process that'll show you how to minimize risk and maximize profit in a highly competitive market.
Flipping Houses For Dummies offers:
So, if you're ready to start revitalizing your community by turning neglected properties into prize homes, Flipping Houses For Dummies is the first and last resource you'll need to navigate your way around the exciting and challenging world of real estate investment.
Ralph R. Roberts is a real estate expert, investor, and author. He has sold over 10,000 homes, and focuses on affordable housing. He wants to help everyone become a homeowner! Ralph is the author of the previous edition of Foreclosure Investing For Dummies, as well as many other publications.
Introduction 1
About This Book 1
Foolish Assumptions 2
Icons Used in This Book 3
Beyond the Book 4
Where to Go from Here 4
Part 1: Getting Started with House Flipping 5
Chapter 1: Brushing Up on the Basics 7
Grasping the Concept of Flipping 8
Spotting distressed properties 8
Doing your homework 8
Making a few minor (or major) alterations 9
Reselling your rehabbed property 9
Flipping Legally and Ethically 10
Flipping illegally 10
Flipping legally: Buy, fix, sell 10
Determining Whether You Have What It Takes to Flip 11
Devising a Reliable Flipping Strategy 13
Building an All-Star Team 14
Finding and Buying a Flippable House 15
Rehabbing Your Fixer-Upper 15
Planning repairs and renovations 16
Applying makeup 16
Making a good first impression 17
Focusing on kitchens and bathrooms 17
Making moderate changes 17
Tackling structural enhancements 17
Profiting from Your Venture 18
Chapter 2: Devising an Effective Flipping Strategy 19
Deciding on the Role You Want to Play 20
Surveying Different Strategies 20
Buy into a hot market 21
Buy low, do nothing, sell quick 22
Buy low, apply makeup, sell quick 22
Buy low, renovate, sell high 23
Buy low, move in, renovate, sell high 23
Buy, hold, lease 24
Invest in new construction 24
Focus on a niche market 26
Flip contracts (or do it all on paper) 27
Cook up your own strategy 27
Drawing Up a Detailed Plan in Advance 28
Plan B: Surviving a Flip That Flops 30
Chapter 3: Building Your Dream Team 31
Teaming Up with a Quality Real Estate Agent 32
Recognizing the value of an agent 32
Picking an agent with the right stuff 34
Recruiting Moneymen (and Women) 36
Finding financiers 36
Hiring an accountant 37
Obtaining sound investment advice 38
Covering Your Back with Title and Homeowner’s Insurance 39
Locating an Experienced Appraiser 40
Adding a Real Estate Lawyer to the Roster 41
Lining Up a Home Inspector 42
Calling In Your Rehab Team 44
Chapter 4: Securing the Funds to Fuel Your Flips 47
Recognizing the Importance of Being a Cash Buyer 48
Tapping Your Own Resources for Cash 49
Shaking your piggy bank 49
Unleashing the equity of your current home 49
Cracking open your retirement nest egg 53
Leveraging the Power of Other People’s Money 54
Persuading a bank to finance your flips 55
Passing the hat among friends and family 56
Borrowing from a private (hard money) lender 57
Making up the difference with a gap loan 58
Partnering with an investor 59
Using Conventional Financing (for Longer-Term Real Estate Deals) 59
Determining what you’re worth in dollars and cents: Net worth 60
Checking and correcting your credit report 61
Avoiding mistakes that can sabotage your loan approval 64
Comparing loans 65
Finding lenders online and off 66
Borrowing for purchase and renovations with a renovation loan 67
Part 2: House Hunting with an Eye for Flipping 69
Chapter 5: Scoping Out a Fertile Neighborhood 71
Pinpointing House Flipping Hot Spots 72
Tracking migratory patterns 72
Tagging promising neighborhoods 73
Finding your focus 74
Identifying areas in your price range 75
Sizing Up the Local Real Estate Market 76
Tracking the appreciation rate 76
Noting how many homes are currently for sale 77
Discovering how long houses stay on the market 78
Comparing Neighborhoods 78
Spotting the signs of a good neighborhood 78
Telling when a neighborhood is in decline 79
Considering Other Neighborhood Factors 80
Grading local schools 81
Digging up crime statistics 83
Exploring the business climate 84
Getting the lowdown on planned neighbourhood improvements 85
Chapter 6: Hunting for Houses in Your Target Area 87
Developing a List of Criteria to Guide Your Search 88
Focusing Your Search on Affordability 90
Digging through Property Listings, Ads, and Publications 91
Searching listings with the help of your real estate agent 92
Scanning the classifieds for keywords 96
Skimming real estate magazines 96
Scoping out For Sale By Owner properties (FSBOs) 97
Mining Special Markets for Dontwanners 97
Cruising the neighborhood for dontwanners 98
Tapping into special markets 98
Advertising to Generate More Leads 101
Chapter 7: Closing In on Foreclosure Properties 103
Getting Up to Speed on the Foreclosure Process 104
Brushing Up on Local Rules and Regulations 105
Procedural stuff 106
Different types of foreclosures 107
Taxes 108
Picking Your Point of Entry into the Foreclosure Process 108
Pre-foreclosure 109
Foreclosure 115
Post-foreclosure 117
Purchasing Foreclosure Properties, Step by Step 118
Step 1: Find a property 119
Step 2: Follow the paper trail 120
Step 3: Inspect the property 120
Step 4: Bid on a property (when buying at an auction) 120
Step 5: Survive the redemption period 123
Chapter 8: Scoping Out Properties in Special Markets 125
Acquiring Properties in Probate 126
Finding probate properties 126
Digging up a death certificate for more info 127
Finding out who can sell the property 128
Contacting the next of kin 128
Keeping tabs on overbids 129
Scooping Up Bargains in Bankruptcy 129
Brushing up on bankruptcy laws 130
Knowing when to purchase 131
Tracking down houses in bankruptcy 132
Digging up additional info 132
Dealing with the gatekeepers 133
Planning for delays 135
Finding Government Owned Properties 135
Buying Properties at Tax Sales 138
Part 3: Evaluating Properties and Crunching Numbers 141
Chapter 9: Researching Distressed Properties 143
Creating a Property Dossier 144
Checking Out the Property 146
Doing a drive-by, walk-around inspection 147
Snapping photos 149
Following the Paper Trail 149
Honing your title acquisition and reading skills 150
Picking details off a foreclosure notice 152
Digging up details at the Register of Deeds office 156
Gathering tax information at the assessor’s office 161
Getting your hands on the property worksheet 162
Chapter 10: Inspecting the Property and Estimating Rehab Costs 163
Packing for Your Inspection Mission 164
Finding the Perfect Candidate for a Quick Makeover 167
Poor-but-promising curb appeal 167
Cosmetically challenged, inside and out 168
A second-rate showing 168
Assessing Potential Curbside Appeal 169
Taking a Big Whiff, Inside and Out 170
Inspecting the House for Big-Ticket Items 171
Focusing on the foundation 171
Checking out walls and floors 172
Examining the siding 172
Giving the roof and gutters the once-over 173
Glancing at the windows, inside and out 173
Evaluating the plumbing 174
Exploring the electrical system 174
Checking out the furnace and air conditioner 175
Adjusting your eyes to the lighting 176
Discovering Some Promising Features 176
Arriving at a Ballpark Figure for Repair and Renovation Costs 179
Chapter 11: Calculating Your Profit and Best Offer 181
Doing the Math to Ensure a Profitable Flip 182
Adjusting for market conditions 182
Crunching the numbers 183
Estimating a Realistic Resale Value 184
Accounting for Expenses 185
Unpaid property taxes and water bill 185
Closing costs 185
Cost of repairs and renovations 186
Holding costs 188
Marketing and selling costs 189
Income tax 191
Chapter 12: The Art of Haggling: Negotiating a Price and Terms 193
Planting the Seeds of Successful Negotiation 194
Making an Offer They Can Refuse (But Will Consider) 195
Calculating a price 196
Proving you’re earnest: Money talks 196
Dangling additional enticements 197
Protecting your posterior with weasel clauses 199
Tending to the Details: Inspections, Appraisals, and Walk-Throughs 200
Inspecting the house from the ground up 200
Ordering an appraisal 203
Taking one final walk-through 204
Closing the Deal 204
Part 4: Fixing Up Your Fixer-Upper 207
Chapter 13: Building and Managing Your Rehab Team 209
Identifying the Expertise You Need 210
Finding and Recruiting a General Contractor or Subcontractors 212
Adding a Handyperson and Other General Help to Your Crew 214
Structuring Financial Agreements 214
Contracting with Your Contractors 215
Managing Your Rehab and Your Team 216
Drawing up a punch list 217
Assigning projects 217
Scheduling the work 217
Managing your team 218
Chapter 14: Prioritizing and Planning Your Renovations 221
Developing an Eye for Home Improvements 222
Prioritizing Your Projects 223
Tackling essential repairs 224
Gauging renovations to get the most bang for your buck 225
Adding inexpensive, last-minute touches 226
Delegating Duties 226
Identifying do-it-yourself projects 227
Getting a little help from your friends 227
Flagging jobs that require professional expertise 228
Drawing Up a Tentative Budget 229
Coming Up with a Game Plan 231
Switching on utilities and ordering materials and a dumpster 231
Tackling underlying problems first 232
Working from the top down 233
Working from the outside in, or vice versa 233
Allotting sufficient time for your projects 234
Chapter 15: Giving Your Property a Quick Makeover 235
Sprucing Up the Yard 236
Freshening the Façade 238
Touching Up the Interior 241
Revitalizing the entire interior 241
Updating the kitchen 244
Spending quality time in the bathrooms 245
Modernizing the bedrooms 246
Making the basement look livable 246
Attending to the furnace and hot water heater 247
Chapter 16: Perking Up the Curb Appeal 249
Revitalizing the Landscape 250
Doing the bare minimum 250
Revitalizing a tired lawn 250
Designing an adequate landscape 251
Prepping areas for planting 252
Positioning and planting your greenery 252
Adding the final touch: Fresh mulch 253
Maintaining the landscape 253
Tidying Up the Driveway and Walkways 254
Asphalt driveways 255
Concrete driveways and walkways 255
Stone or brick walkways 256
Making Entryways More Inviting 257
Refinishing the front door 257
Refurbishing the front porch 257
Adding some finishing touches 258
Refreshing the Outside Shell of the House 258
Laying a new roof 259
Repairing or replacing gutters 260
Retooling the siding 260
Glamming Up the Garage 262
Chapter 17: Dazzling the Crowds with Updated Kitchens and Baths 265
Giving a Facelift to Kitchen Cabinets, Countertops, and Sinks 266
Refinishing or replacing cabinets 267
Updating hardware: A cosmetic fix 268
Resurfacing or replacing countertops 269
Installing a new sink and faucet 269
Modernizing Kitchen Appliances 270
Deciding whether to install appliances 270
Adding or replacing the dishwasher 271
Roaming the range, oven, and cooktop 271
Installing a space-saving microwave 273
Keeping, removing, or replacing the refrigerator 273
Updating the Bathrooms 273
Repairing bathroom walls and floors 275
Refinishing or replacing tubs and showers 276
Dealing with la toilette 277
Updating the sink and medicine cabinet 278
Adding or improving ventilation 279
Chapter 18: Tackling Moderate Makeovers 281
Installing Replacement Windows 281
Knowing your window options 282
Trimming the cost of new windows 284
Replacing Drab, Weathered Doors 285
Making the quick fix with a new storm door 285
Replacing an entry door 285
Repairing or replacing sliding glass doors 286
Installing new interior doors 287
Putting on Your Own Floor Show 287
Laying vinyl or linoleum flooring 288
Refinishing hardwood floors 288
Updating the hardwood floors 288
Laying ceramic tile for a touch of class 290
Chapter 19: Reconfiguring Spaces and Other Structural Overhauls 291
Attending to Essential Structure and Infrastructure Repairs 292
Fiddling with the Floor Plan — or Not 292
Identifying Load-Bearing Walls 293
What is a load-bearing wall? 293
How are conventional and truss roofs different? 294
Is this wall load-bearing? 294
Maximizing the Use of Existing Space 295
Knocking out walls 295
Raising the ceiling 296
Designing a whole new kitchen 296
Adding a bathroom 297
Spreading out to an attached garage 297
Transforming a porch into a room 297
Creating a room in the attic 298
Deciding whether to finish a basement 298
Building New Rooms from Scratch 299
Adding a Deck or Patio 300
Part 5: Cashing In: Realizing Your Profit 303
Chapter 20: Considering Your Options: Cash or Cash Flow? 305
Setting a Goal: Cash or Cash Flow 306
Cashing Out: Selling the Property 307
The buy-fix-sell approach: Listing the property for sale 307
The buy-sell strategy: Selling to another investor 308
Exploring Cash Flow Possibilities 308
Refinancing to cash out the equity 309
Reselling a foreclosure property to the previous owners — or their family 309
Leasing the property to the previous owners 312
Offering a lease-option agreement 313
Assigning your position to a junior lienholder 314
Chapter 21: Marketing Your Home 317
Harnessing the Power of a Real Estate Agent to Market and Sell Your House 318
Knowing why you should hire a seller’s agent 318
Negotiating with an agent during the selling process 319
Taking advantage of your agent’s access to the MLS 320
Setting an Attractive Asking Price 320
Don’t be greedy 321
Understand the current market 321
Know the price you need to make the profit you want 322
Staging a Successful Showing 322
Recognizing the value of staging 323
Making your staging checklist 323
Offering to Help Secure Attractive Financing 324
Becoming a Real Estate Marketing Maven 325
Choosing a method of contact 325
Planting a For Sale sign on your lawn 326
Listing your home online 327
Designing, printing, and distributing flashy flyers 328
Advertising your home in the classifieds 329
Hosting an open house to build word-of-mouth buzz 330
Chapter 22: Negotiating the Sale to Maximize Your Profit 331
Comparing Seemingly Similar Offers 332
Does the buyer have financing? 332
How “earnest” is the buyer? 334
What else is the buyer asking for? 334
What conditions has the buyer included? 336
How soon does the buyer want to close? 336
Mastering the Art of Counteroffers 337
Submitting a counteroffer 338
Leveraging the power of multiple offers 339
Shuffling Papers and Other Legal Stuff at Closing 340
Having the right folks represent you 340
Prepping for closing 341
Sealing the deal with paperwork 341
Chapter 23: Trudging through Some Taxing Issues 343
Estimating the Tax Collector’s Take from Your Flipping Profits 344
Maximizing Tax Savings from the Sale of Your Principal Residence 346
Proving “principal residence” 346
Qualifying for the two-out-of-five-years rule 347
Taking the ownership test 348
Splitting hairs: Special circumstances 348
Slashing Your Capital Gains through Careful Deductions 349
Deferring Taxes: Rolling Your Gains into Your Next Purchase 350
Selling Your Home at a Loss (Ouch!) 351
Paying Income Tax: When Flipping Houses Becomes Your Occupation 351
Part 6: The Part of Tens 353
Chapter 24: Ten Ways to Find Dontwanners 355
Cruising the Neighborhood 355
Teaming Up with a Qualified Real Estate Agent 356
Checking Classified Ads and Online Listings 356
Skimming Foreclosure Notices 357
Monitoring Tax Sales 358
Scoping Out Bank-Owned Properties 358
Probing Probate Properties 359
Digging Up Houses in Bankruptcy 360
Sifting through the Government’s Stash 360
Networking and Advertising for Leads 361
Chapter 25: Ten Signs of a Great House Flipping Opportunity 363
The Location Is an Obvious Hot Spot 363
Nobody’s Home 364
The “For Sale By Owner” Ad Is Shrinking 364
The Seller Is Highly Motivated to Be Freed from the Burden of Ownership 365
The House Is Ugly Outside 365
The House Is Ugly Inside 366
The Decor Is Outdated 366
The House Has Character 366
The House Has Undeveloped Living Space 367
The Property Backs Up to Nothing 367
Chapter 26: Ten House Flipping Blunders 369
Falling for a Scam 370
Speculating on the Housing Market 370
Waffling on an Obviously Good Deal 370
Backing Yourself into a Contractual Corner 371
Failing to Inspect the Property before Closing on It 371
Assuming That the Title Is Clear 372
Underestimating the Cost of Repairs and Renovations 372
Doing Shoddy Work to Save Money 372
Over-Improving a Property 373
Forgetting to Pay the Taxes 373
Index 375
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