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10 things you need to know before considering flipping properties:

  1. Have a credit score of 660 or above if you need a loan.
  2. Have at least $10,000 in accessible funds (i.e. savings, money market, checking, credit card cash advance, etc.) as a reserve in addition to the down payment to cover any unforeseen costs.
  3. Have at least 20% in liquid assets (i.e., 401K, savings, money market, checking, etc.) because most lenders require a percentage of the purchase price and rehab cost.
  4. Establish a relationship with a rehab friendly lender and get pre-approved.
  5. Understand the dynamics of flipping from a legal and accounting perspective.
  6. Obtain a professional real estate license or establish a relationship with a real estate agent who is experienced in the business.
  7. Know how to analyze a property to ensure that it will make a profit.
  8. Learn about the areas and neighborhoods where you are interested in investing.
  9. Learn how to select and manage a general contractor.
  10. Understand the key points in successfully selling your investment property.

PLEASE NOTE: If you are a cash buyer you would skip items 1-4.

Flipping Property

“Flipping properties” is where a real estate investor purchases a property for less than its value, makes the necessary repairs and updates, and then sells the property for a profit usually within a short period of time.

In the beginning…

Only a few years ago, investors with extra money could easily invest in flipping properties and realize a quick and profitable return. Ordinarily, this would be the perfect time to invest because foreclosure rates are at their highest in the history of the United States. As a result, there are a lot of properties priced significantly below market value that are available for purchase. But, you’d better know exactly what you are doing because it could be potentially dangerous and have a very serious impact on your financial health for years to come.

You are personally accountable

Flipping properties can be an attractive and a tempting investment because of the potential to yield substantial earnings, however, it has also proven to be difficult. The economy has severely affected the way real estate is purchased and sold these days, especially from an investor’s perspective. The dynamics of lending have changed with banks and they are heavily scrutinizing buyers and investors. These lenders have lost so much money from foreclosures that quite frankly, they’re scared. Those who are able to acquire investment properties are having difficulty finding qualified buyers due to the tightening of lending guidelines. As the owner, you are financially responsible for all the monthly debts involved in holding investment property such as the mortgage payments, taxes, insurance, utilities, and maintenance until it sells or you find a tenant. This is the number one reason why you must be experienced and savvy to flip properties these days. Most investors don’t anticipate paying expenses for 6-8 months and, as a result, they deplete their savings and retirement. Ultimately, the lender they may foreclose on the property or for the cash investors you run out of money.

Today’s investor must be very wise

Investors must use extreme caution when hiring and depending on other professionals such as contractors and realtors. Contractors usually only understand how to repair or rehab a property from their perspective. If they have not experienced the investor’s point of view of real estate, they will not understand the intricacies involved in flipping and too often give bad advice. Realtors are frequently less equipped when it comes to investing. Realtors are taught to sell properties. Rarely will you run into a Realtor who has investment experience. As a result, they may give bad advice or simply don’t know enough to give you critical information that’s needed to buy investment properties.

Eric’s Tip: Do not hire Realtors or Contractors for investment purposes that currently don’t own real estate or not actively involved in buying real estate PERSONALLY.

Realtors are licensed to sell property and contractors are only responsible for making repairs. However, flipping properties requires the ability to perform a detailed analysis, which includes ways to economically improve the property while maximizing the profit, as well as evaluating the market to predict what the after repair value will be. Therefore investors must become a student of the business and acquire extensive knowledge from a real estate professional that has worked in the business and is able to walk you through the process step by step.

The Ultimate Solution

We have been in real estate for nearly two decades and have flipped over 50 properties in those years. As real estate professionals (Realtor, Contractor, Investor), we have developed an impeccable reputation and really encourage you to join our Real Estate Investment Program to virtually eliminate all the risk mentioned.