Flip properties
With the influx of REO properties on the market, this is a good time to again consider selling those properties as an investment strategy. However, what is different today is that it is not simply a buy and sell scenario in which a rising market will ensure a profit. You will need to keep an eye on the value, understand the cost that will be incurred in upgrading the property, and know if the property may need to be rented for a period of time before the market produces the profit you want.
Due to different market dynamics, fans have fallen by the wayside. There will be less competition for those houses that need a little TLC. Buyers often cannot see beyond the wear and tear of a foreclosed property to understand the underlying potential.
One of the criteria that will need to be considered before pulling the trigger on an acquisition is the neighborhood. One of the best things to consider is the difference between the price for which you can purchase the property and the recent sales data for that particular neighborhood. Is there enough room for me to pay off the mortgage for a month before I can rent it or put it up for sale? How much additional investment is needed? Is it simply cosmetic? Or is it necessary to make a real capital improvement?
Calculate the purchase price, the cost of the improvements and the maintenance costs and see if you can make a reasonable profit or if the current rental rates will cover your monthly expenses. This is not a step to take lightly. Success in real estate investing is 90% planning.
One of the other criteria to consider is the motivations of the seller. Real estate is an expensive game of poker. Sit down the seller, the agent cannot reveal the seller’s motivations, ask why he is selling, and observe his facial expression. You will be able to tell how urgent the situation is by their reaction. Their motivations can range from the home being an inheritance they want to liquidate or facing foreclosure. Your level of urgency will let you know how to negotiate and whether you will be able to get the property at a price that fits your analysis of property and neighborhood.
Therefore, you are going to look for houses that can be bought at a discount in the market and that can be improved aesthetically, but at an affordable price. Going around the house will be the relatively easy part. If you’ve planned and bought correctly, all you’ll have to do is bring the improvements within budget, then list the house slightly below market value for a quick sale.