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    18 Replies Latest reply on Oct 23, 2007 8:24 PM by cedricjd

    Is this the right time to start a real estate improvement (flipping) business?

    sbmark Newbie
      My husband and I are thinking about starting a business to "flip" houses. Is this the right time considering the housing market has been, and will most likely continue, in a slump? Any thoughts on the best way to start?
        • Re: Is this the right time to start a real estate improvement (flipping) business?
          ScubaDive Wayfarer
          It seems like now is a time when real estate is not going gang busters, which means it requires a lot more skill and careful planning. I think that when real estate was only going up (driven by speculation), a lot of people jumped in and started buying real estate simply trying to flip it. When the market goes down, the whole flipping model breaks unless you have a long enough time line and can afford the home.

          I personally am going to wait to see how low the market goes and maybe when it has dropped low enough (I give it a couple more years because denial can take a couple of years to set in) and then see if there are some opportunities.

          Please say that homes are not like stocks so there is not as much risk. Homes do not go to nothing in value, but when the price goes down, investors loose the capital gains and have a loss in trying to sell the home. So, in both stocks and homes, if you are not careful and do not have a real plan, you can quick easily loose money. Good luck!
          • Re: Is this the right time to start a real estate improvement (flipping) business?
            SCORE17 Wayfarer
            I would suggest you join a local real estate club to get to know other people in the business, and find out where they source their leads. You can also start building a network of service contractors to support your endeavor. Gaining this knowledge/feasibility of your concept will also give you a few months to monitor the real estate market. Remember, 90% of money is made on the buy. I do not believe seller's expectations have come in line with the fundamentals of the marketplace, and think that it will be several months before good buying opportunities emerge.
            • Re: Is this the right time to start a real estate improvement (flipping) business?
              SCORE63 Newbie
              In some areas, there is a large inventory of foreclosures. The properties are owned by banks and are in all price ranges. I have good fortune in buying wholesale properties from banks. There is no emotion involved and you get to a realistic price in a hurry. You have to be in a position to hold the property, so the rental market has to be there. If you can hold until the next up cycle, you can be in a good position. I agree that joining investor and apartment owner associations is a must. Good luck
              • Re: Is this the right time to start a real estate improvement (flipping) business?
                score81 Adventurer
                Success of any business depend upon detail planning and execution. This is not the best time to start the business. But if you plan methodically and do good job, you can still make money and reputation of your company for coming time.
                You have to change business model. Instead of Flipping. You should look for clients, who wants to remodel home, or want to buy home and get it remodel for their living. What I am trying to say to you is, that you must have buyer in hand. Not the buyer you have to go and find it after end of your project. Chances are you will loose money in that case.
                The other option is look for the property you feel excellent for flipping, make a offer and get time from seller to make sure it can be approved for remodeling. Prepare plan and get a broker involve to estaimate future price. Find a buyer willing to buy when ready. Get contract signed with him. Nowclose the deal with the orignal seller for the run down home and start the work.
                If you do a good/excellent job, believe me people will come looking for you.
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                • Re: Is this the right time to start a real estate improvement (flipping) business?
                  gmonkey Wayfarer
                  I think it really depends on where you live, and what the real estate market is like in that area.

                  I founjd a great website, www.zillow.com, and it gives great information on recent sales in the area, sales prices, etc. It can help you gauge if the property is a good deal or not.

                  Also, remember with all the forecloseures now, you could scoop up a property cheap...just be sure to balance the amount that you have to put into the home with the purchase price, and then do a good analysis on potential sales price. Factor in the number of months you may need to carry the mortgage as well.

                  :-) Enjoy!
                  1 of 1 people found this helpful
                  • Re: Is this the right time to start a real estate improvement (flipping) business?
                    sbmark Newbie
                    Great suggestions & advice. Thank you for your feedback.
                    • Re: Is this the right time to start a real estate improvement (flipping) business?
                      BDS INC Adventurer
                      I lot of it depends on where you are in the country. I am in the property management business and have been "flipping" houses for the past 4 years but have recently started to buy and rent, rather than buy remodel and sell. With credit standards becoming more stringent and the near collapse of the subprime mortgage market. Now may be a good time to buy rental properties like I have and for two good reasons: 1. Lots of home inventory out there, it is a buyers market, so you are likely to negotiate a great deal on an existing property. 2. More renters, the subprime market turned plenty of renters into homeowners, well without subprime loans to turn to, many are returning to renting rather than risking taking out creative loans particularly ARM's which are increasingly harder to get.
                      • Re: Is this the right time to start a real estate improvement (flipping) business?
                        Housing Deals Newbie
                        While I agree there is some risk in the market at this point, there will always be "good deals" in the marketplace because people always have life events that require them to move/sell quickly. The art and science is finding the bargins and ensuring your investment in the house (renovations or otherwise) is less than the incremental value you can sell it for. Any emotion regarding the flipped property needs to be taken out of the process, and its all about the numbers.
                        • Re: Is this the right time to start a real estate improvement (flipping) business?
                          ElCollector Newbie
                          The best way to start is SMALL. Purchase your property in an appreciating area and look to get immediate equity in the property by waiting for the best deal at least 10-20% below market value. You find these deals by proactive marketing such as campaign letters in your desired community, having a good real estate broker, and knowing the desired area thoroughly in terms in recent purchases/sales. Your contingency should always be to rent the property if you can't sell immediately as real estate is usually a long term winner with the last 5 years be very abnormal. That being said, look for properties in lower price ranges (in the SouthEast, I only look for homes in the 125k-200k range that will rent for $1,000-$1,200 if I can't sell immediately) where your rent covers at least 80% of P&I, taxes, etc. This price range minimizes risk in terms of exposure and also makes your property more marketable to the masses for both sale and rental.
                          • Re: Is this the right time to start a real estate improvement (flipping) business?
                            Mozart Wayfarer

                            Related to sbmark's question - how do you find out about "short sales" or homes that are about to foreclose?
                            • Re: Is this the right time to start a real estate improvement (flipping) business?
                              LUCKIEST Guide
                              The best way to start is by WRITTING A BUSINESS PLAN, explaining in some detail
                              your plans to develop a successful business.
                              Before I take out my crystal ball, it would help to know more about your backgrounds.
                              Do you own a house?? or houses?? or real estate??
                              Have you ever "flipped a house"??
                              What state do you live in? and is that where you intend to go into business??
                              The more you share, the better we can help you succeed.
                              Good luck, LUCKIEST
                                • Re: Is this the right time to start a real estate improvement (flipping) business?
                                  Mozart Wayfarer

                                  If it helps to be more specific, I'm from southern Cal & own a duplex property (I live in the front and have a tenant in the back) and have noticed a significant amount of for sale signs in my area. So, I was wondering if it's possible to find out in advance about a pending foreclosure or sellers/real estate agents that want to sell quickly due to an owner about to foreclose. Does the community have any suggestions?
                                    • Re: Is this the right time to start a real estate improvement (flipping) business?
                                      zaghi91913 Newbie

                                      Hi guys, my 1st reply and I hope it might be of assistance. This is in response to Mozart's question about Pre-foreclosures and short sales. I am in the real estate biz and short sales are very complicated, tricky and can be a waste of time. Firstly "Short Sale" simply means the home is being sold for less than the loan amount is and the bank that holds the note has the final decision on price and terms. Many real estate agents have so many homes priced where the banks are rejecting the offers because they are too low. Another pitfall is there is a waiting time of 30 - 60 days after making your offer before the bank comes back with an answer due to them conducting their "due dilligence". Also, during this wait time someone else may make a higher bid than yours. The success rate at the moment is 30-40% acceptance, if you want to make a strong offer be able to close in 10-21 days and have a price that will cover at least the 1st note on the property. If you have cash then you could look into going to auctions and try to pick up properties there or make a cash offer on a bank owned property.
                                      Real estate varies according to states, counties, cities and zipcodes, find the zip codes that are still showing appreciation, find a good realtor, lender, service providers and a good investment club and you'll have a head start.
                                      For more info you can contact me.
                                  • Re: Is this the right time to start a real estate improvement (flipping) business?
                                    SCORE17 Wayfarer
                                    Others may know better sources, but Yahoo Real Estate now allows you to look up pending foreclosures and bank owned properties for free (you will have to pay for the detail though). Go to Yahoo-->Real Estate--> and under property type, click on foreclosures, you can specifiy price range etc. I was shocked at how many pending and bank owned properties are in my area, definitely some opportunities in this niche.
                                    • Re: Is this the right time to start a real estate improvement (flipping) business?
                                      dazzler Wayfarer
                                      Hello. Have you seen the show: "Flipping Out" with professional flipper - Jeff Lewis? It's on the BRAVO channel. Here is a great guy who is very top-notch at what he does and even he admits the business is not what it use to be. He was very stressed out, waiting for his homes to sell to boost his cash supply and keep moving forward. I think the show is very entertaining. If you have not seen it....you maybe can get some tips from it before you actually go out and sign contracts and get started heavy-duty into it.
                                      • Re: Is this the right time to start a real estate improvement (flipping) business?
                                        familyFirst Newbie
                                        There is never a bad time to start in the real estate business, as far as I am concern. The more you wait, the more you wished you started. I started this year. I am learning a lot and trying to make some deals. But ultimately, I believe that by next year, I should be on a roll. What I am saying is, the sooner you start, the sooner you can realize the benefits and gains.