A new trend in the real estate industry is to flip real estate. This involves buying homes that have been abandoned, foreclosed, or are in need of repair at a low price, fixing them up quickly, and then selling them at a large profit before the first mortgage payment is due. While this seems like a no-brainer get rich quick opportunity, there are many issues that some people don’t understand before they enter into this profession.
First, flipping requires a large financial investment. You have to either have a lot of capital available to purchase homes and make improvements, or you need to have good enough credit to mortgage a home and pay for the improvements. You also need to have money in reserves in case you go over budget or if you are unable to sell the home and need to pay for carrying costs (paying the mortgage and taxes). To overcome some of these financial obstacles you may want to take a partner in this venture to help divide the financial burden a bit during the first few flips.
The next thing that flippers need to understand is politics. You need to know what people to talk to to get zoning and/or permits for construction. This includes knowing the areas that your properties are located in and what special considerations you will need to take, especially if the property is in a historical district. In historical districts you may be required to have exterior paint choices approved, as well as any physical alterations to the structure including adding decks, decorative elements, and what materials are acceptable for facades and architectural construction or reconstruction. Making friends with people in the permit department and with people who are on community boards will help make your flipping business run a lot smoother.
You will also need to be able to remain organized, on budget, and on time. At the onset of a new project make out a timeline of what needs to be done by when and who is responsible for getting what done by when. This will help you stay on track with your project and it will help you identify areas that may trip you up.