Real estate is currently a buyer’s market. It is the perfect time to buy a house. Some people are using this as an opportunity to flip houses. Before you buy a house to flip, there are many things to consider. Some things are the amount of work you are willing to put in to it, location, and cost. This article will look into the cost of real estate.
Cost can be broken down into two categories. The first is the actual cost of the property. The other is the cost of renovation and/or updating the property. Both need to be considered before you buy real estate. Find a real estate agent you trust. One who knows the area that you are looking to buy. They can be a valuable source of information. They can help you decide if the property is worth buying, even at foreclosure prices, and the amount of work that needs to be put into the house.
When you find a house you like, try to get the price down as far as possible. The cheaper the house the better. If the house is only 25% off, don’t buy it. You will not be able to make a profit off of that small a mark down. The property should be marked down to at least 35% before you can make a profit. In the current market, you will be selling the house at a lower price than you would have in the past. Then there is the amount of money you will need to put into the house to make it sell able.
If you buy a house for $70,000, you put $10,000 into the house, then spend $8,000 to sell the house with a real estate agent. The seller also pays all closing costs. Costs mount in a depressed real estate market. The seller ends up discounting the house to sell it fast. Otherwise you may be left paying two mortgages, yours and the house you are trying to flip. If your goal is to sell the house for $120,000, you may have to lower the price to $110,000 or even $100,000.
Beyond the house cost, there are costs associated with updating or renovating the house. This cost needs to be included when deciding on real estate. When looking at the house, take a notebook and a camera. Take pictures and notes about problem areas. Is the structure sound? Do the floors need to be redone? Do the windows need to be replaced? Is the plumbing up to date? Is the heating and air conditioning systems in need of replacement? These and other questions will need answers as well as expected cost.
The more work the house needs, the more expensive it becomes. Murphy’s Law of real estate says, the cost of renovation is always more than you expect. If the roof needs to be replaced or if major reconstruction is needed you may want to skip that house. The cost you will put into the house may be more than you will make. It is always good to overestimate the cost of renovation.
There are two important tips to take with you. 1) You don’t have to make an old house new. You just have to make it habitable. That means don’t overspend on trendy details. The new owners can do that. Just make it solid, clean, and safe. 2) You will not get more than the going rate for the neighborhood. That means don’t pay full price for the house. Then spend another $20,000+ on making it a show house. The problem is you will price yourself out of the neighborhood. People will not spend more than what the neighborhood is worth.
Real estate is a tricky business. It is a buyers market. There is a possibility of making a profit with flipping houses. Investigate the house and neighborhood first. Crunch the numbers. Think with your brain not your intuition. The more you know the better decision you can make.