In the areas of the country where the real estate bubble has burst, property values are dropping quickly. Some who bought property expecting to turn a quick profit are now facing foreclosure. This means that opportunities exist for those with enough capital to sieze the day and pick up property at deep discounts.

Many times, owners who are not broke, but could end up that way if they cannot sell, will sell property for a significant loss to avoid foreclosure. They are anxious to keep their credit rating as strong as possible. This means that if they can absorb thousands of dollars of losses getting a little something is better than losing it all.

If the house has been rehabbed, you may be able to buy the house at less than the original price and get the extra work thrown in the deal. This means that you can do just a little finish work and have the house ready for resale. You do not have to make the amount of the former owner because you have almost no investment above the purchase price. Anything that the house brings above commissions and cost is in your pocket.

The trick is to not get greedy. In any investment, pigs go broke. Target a reasonable profit for the investment and length of time it was held. If you can make 10%, it will be worth the effort. If the house is above a half million dollars, you may even be able to settle for a 5% return.

Once a house has been foreclosed and repossessed, you can often get the property for around ½ to 2/3 of its value. For houses in slightly rundown condition, the price can go even lower. With good credit or a pocket full of money, you can buy these houses from a friendly bank and sell them without even touching the house. Because banks cannot legally hold the property more than a set amount of time, they are usually hot to get them off of the books. This is good for you.

The key to making money is to sell them fairly quickly and keep your money moving. You profit on each house and move on. Many people make a reasonable living by flipping four or five houses per year. The first one can be a little scary, but after you get used to it, it is a great job.

One of the best places to start is to find a real estate broker who will let you work for them to secure a real estate agent's license. Most of these jobs are commission-only. This means that you can almost always find someone willing to take you on as an associated. Once you have secured a position, you will need to study the manual until you are ready to take the test for your license.

When you have the license, start looking for people who will let you list their house. This can be easy money if you can get some listing in areas with fast moving houses. With a listing in your name, all other agents will be helping you try to sell that house. You do not make as much for not selling it, but you will make something when it sells. Keep working on listings while trying to sell a little.

Watch for houses that can be purchased with equity from your existing home. Look for houses to fix up that do not require too much work. Buy these and start flipping them. As you build a reputation for moving houses, more people will bring you listings and banks may even start to contact you to buy foreclosures.

Do not plan to be a millionaire in the first few years. It will take two or three years to begin to establish the cash flow and reputation that you need to grow your estate. If you have a job and can keep it, it will prevent you from losing your shirt during these first few lean years.

Once you have become established, just keep working the plan. Get more listings, buy houses to flip, and sell what you can. The money will begin to take care of itself. With diligence, you may make it to a million dollars within a decade or less. This is money in the bank not just earnings. Just remember not to spend your fortune before you have it.

Probably the biggest mistake rookie flippers make when deciding to remodel a home for profit is lack of planning. Research is vital to a successful remodeling flip. Not anticipating unseen costs can turn a profitable flip into a bottomless money pit in a hurry. The following are some mistakes to avoid when considering a house flip.

1. Do not give yourself too little time to properly complete the job. Unseen problems can put a project over schedule which can seriously affect budget. Ensure you can afford to carry the costs of the remodel as well as the cost of mortgage payments in the event the house does not sell as quickly as anticipated.
2. Do not, on the other hand, procrastinate project completion unnecessarily. Time really is money in this case. The longer the project is drawn out, the more your carrying costs will eat into your profits. Carrying costs include mortgage, insurance, and utilities payments required by the homeowner while the home is being remodeled and on the real estate market.
3. Do not cut corners by failure to get the home inspected prior to closing on the initial deal. Unseen, hidden damages can blow your budget. In some cases, such as asbestos in older homes and damaged foundations, these unseen problems could make the project not worth the time, money and effort required to restore the home for resale. A thorough home inspection will help you make a wiser, more informed choice when selecting a project house.
4. When locating financing for your flip project, ensure that you are able to cover the entire project from purchase to resale. It is extremely important to be able to make draws on funds when the need arises instead of delaying the work while you seek further funding.
5. Before you purchase a home, ensure that you do your homework on the area in which your project home is located. Ask yourself some important questions: Will the average person feel comfortable and safe in this neighborhood? Are you “over fixing” the home compared to other properties in the area? You wouldn't want to buy a house in a lower priced neighborhood, remodel it to a high priced home, and then not be able to resell because the price is not competitive to comparables in the area. If the home is in an historical area, what are the restrictions pertaining to remodeling? Must the paint colors or improvements be approved by a historical committee prior to commencing the work? Does the house meet code standards? Some homes may be allowed to not meet code…Until you make improvements or excavate for new plumbing or wiring. Bringing a home up to code may be prohibitively expensive. Are there major drawbacks beyond your control to a potential buyer's desire to buy your home? For instance, is the home located too closely to main interstate where access to the home would be inconvenient? Is the home located close to a school or business that would increase the noise level? Is the home in a flood plane, requiring the homeowner to carry more expensive insurance?
6. Make sure you obtain necessary permits to complete work prior to beginning the work. Obtaining permits after the fact can cost valuable time in an already limited schedule. Money may be wasted due to scheduling conflicts with contractors who had expected to be working on your project, but were unable to do so due to lack of a required permit.
7. Another mistake flippers often make is trying to design a project home as if they were going to remain there. Warm paint and wood colors help create an inviting atmosphere, but colors that are not easily complimented tend to put off buyers. Exotic wall treatments, fixtures, and paint should be avoided in favor of tasteful and more neutral styles. In the same vein, quality should not be sacrificed for speed of installation and resale profits. The old adage “You get what you pay for” definitely holds merit here.
8. Many flippers believe that the job can get done without supervision. If you want to make your flip successful and profitable, you must supervise every stage of the work. Not only will this help you stay on schedule but it will allow you to know the quality of work being accomplished with your hard-earned money. Although home remodeling can be very stressful and make one desperately in need of a vacation, renovation time is definitely not the time to leave the project unsupervised. There will be plenty of time to enjoy relaxation after you have completed the work.
9. Staging the project home is a step often overlooked by sellers. Staging is the careful and planned placement of furnishings and accessories to complete the overall look of the home. Furnishings need not be expensive or fancy. Rental furniture may even be a wise idea to plan into your budget. Proper staging provides the potential buyer with an immediate idea of purpose and size of rooms in the home. Staging can also help diminish small imperfections in floors and walls. Staging can be the one point which showcases your home best.

With proper planning and diligent budgeting, remodeling homes for profit can be fun and extremely lucrative. Arm yourself with knowledge before any major remodel project. This will not only make the job proceed more smoothly, but will most likely increase your profits in the long run. Happy flipping!

How do I find a good home to rehab?

In my experience, it is usually the real estate agents who come across properties that are excellent candidates for rehabbing. Most realtors will be happy to send you new listing as they come up.

Look for homes that have been neglected from a maintenance and cosmetic standpoint, but without serious structural problems. Every house will have a different potential for return on investment so educate yourself on the neighbourhood and what you might realistically expect to get.

If you look for vacant, abandoned or boarded up properties, you can often get the owner to help with the financing by way of a “vendor take back” mortgage. Not only are they motivated, but knowing that you intend to resell the property in the near future all but guarantees a quick return of their funds.

How do I estimate the cost of repairs?

This is not as difficult as you might thing. Once you have flipped a few houses, you will have a pretty good grasp of what things costs.

For those repairs you cannot do your self, you will need to find professional contractors. The best way is through referrals. Whenever using contractors, get a few quotes and referrals and make sure they put everything in writing. Once you find the best contractors, you can stick with them from project to project.

If this is so great, why doesn’t everyone do it?

The first reason is time. Time commitments vary from project to project and from person to person. If you plan on six months from start to finish, this means you will not see any profit for six months. Hopefully, your project will be completed sooner, but it could also take longer!

The second reason is the seed money. You have to come up with money for these projects not only to purchase and repair the property, but to carry the associated costs of another house until closing. A good deal with great potential is lost if you cannot afford the initial investment.

You also have to learn that financing is not always straight forward. Qualifying for a mortgage depends on things like credit rating, income, down payment, etc. Few conventional lenders will be anxious to lend based on your projected returns so you may have to turn to a broker who is specialized in hard-to-place mortgages.

I have the house, now what?

Once you have the house and can start on the project, you really need to keep one thing mind – your goal is set your house apart from every other property for sale in your neighbourhood.

Since curb appeal gets them in the door, get the front of the house looking fantastic and replace the roof and windows if needed. Buyers like to see that these items have been replaced due to their perceived expense. Modernize the landscape and outdoor fixtures and doors. The house that looks up-to-date is going to attract the most attention.

If your house does not have central air conditioning, have it installed. Not having central air tends to solicit a negative response, since it is almost expected now.

Hardwood floors are extremely desirable so if your house does not have hardwood floors that can be refinished, have them installed. If your budget prohibits the entire house from being fitted with hardwood, just do the living room and dining room. There are plenty of inexpensive but modern choices in ceramics and carpeting. Bathroom and kitchens sell houses, so plan on spending the bulk of your budget on these rooms. Try to incorporate some luxurious touches that add that extra appeal – such as whirlpool tub or potlights.

I’m done, now what?

Much like a model home, you need to present your rehabbed home in the same light. Borrow or rent tasteful furniture and accessories to demonstrate to your potential buyers how well the house functions.

Rehabbing or flipping houses is not for everyone and it is not guaranteed income, but it is fun and potentially rewarding for those who like a creative and hands-on approach to earning money!