Flipping houses for profit can be a very good business these days. While foreclosure rates remain at historic highs, there are many bargains out there.
There are a few ways to acquire homes below market price, but with the high inventory that the banks currently have, buying bank owned properties is perhaps the best way in today’s market.
In my experience, the most successful formula for flipping a house is to buy at the entry level price, make a cash offer and choose a property in a good location that will need only cosmetic rehab.
By targeting the entry level market, you can accomplish two things at once. Number one, you can keep your costs down. This includes your purchase price and your carrying costs. Carrying costs on a $500,000 loan are much higher than those on a $80,000 loan. That is pretty obvious. What is not obvious, however, is how this can effect your bottom line in todays market.
Financing is pretty tight these days, to say the least. Homes priced at the higher price points are taking longer to sell, generallly speaking, than the entry level homes. This is not only because of the price point, but also because of financing woes. Even well qualified borrowers can have difficulty obtaining a loan on say a million dollar home, meaning there are a number of homes under contract that will eventually fall out due to lack of financing.
With the entry level homes, you will have some fall out as well, but servicing a smaller debt if and when your buyer falls out is going to allow you to weather that storm and still be profitable on your flip.
The second part of the equation is making cash offers. If you have $100k in the bank, and write offers on high end homes, you will be writing offers contingent upon financing. You are not likely to get the best response from a bank that owns a property when writing financing contingent offers.
Instead, if you write an all cash offer that allows you to obtain financing at no cost or time to the seller, your chances of getting an offer accepted at adventagous terms to you as a buyer will go up dramatically.
We will be looking at more topics related to flipping homes. I am a private money specialist in the state of California, and have access to some unique rehab funding programs. Feel free to visit my rehab funding page for more details.