Real Estate Chat

First Time Buyers July 22, 2009

Flipping houses is becoming a full-time job for a lot of hard-working U.S. citizens. Since the steady collapse of the economy has left houses selling at an all-time low, now is the perfect time to buy. The catch 22 is that you might wind up getting stuck with it. The toughest part is determining whether or not you will be able to sell the house once you’ve fixed it up and what the resale value will be.

First time buyers are usually out to purchase a house that they plan on living in for at least a few years. First time flippers are looking for a house that can be bought for dirt cheap (relative to the price of houses in the surrounding area) and sold again at a price higher than what they paid for it (but reasonable for the neighborhood). They have to find a house that has a good balance between purchase price and the cost of repairs that will be going into it. The final product should be a house with an assessed value that does not exceed some of the higher priced houses in the neighborhood.

Given the circumstances surrounding a successful flip, rookie investors may be hesitant to take on their first property flip. Whether their intentions are to sell it or rent it out, the condition of the economy makes a lot of people nervous and scared that they are throwing their money away. One general rule of thumb that I’ve heard multiple times is that investing in real estate is never a bad idea. You just have to make sure you crunch the numbers and that you aren’t getting in over your head.

That being said, first time flippers should be sure that they don’t take on a property that needs a 100% overhaul. A wise decision for a first flip would be investing in a property where the property owner and some friends/family might be able to do the bulk of the work themselves without most of it getting contracted out. Therefore, steer clear of houses with foundation problems, major electrical and plumbing problems and stick to the houses that need some cosmetic fixes, new appliances, and some minor repair work. These houses might not give you the most return on your investment, but sure will have a lot less risk involved. In the end you will guarantee yourself that you’ll get at least the amount of money that you paid for the house back when you rent or sell it. In addition, once your first flip is done, you’ll have more experience with renovating a home and will know what to look for when taking on a second property. The new knowledge you gain with each flip will give you a better understanding of what kind of work will be involved, how much the repairs will cost, how much risk is involved, and therefore, how much of a return you will ultimately make on your investment.

Happy House Hunting!

P.S. Be sure to check out the government incentives that are offered in your area and on specific houses. The government has a lot of program available that actually give you money to do many of the repairs on the house. At the very least, you might be able to get an extended tax break for helping to rejuvenate the housing market and cleaning up the face of homes throughout a neighborhood.