Who hasn’t seen a good HGTV show about flipping a home? We have all probably watched the physical renovations on TV: the decor, the painting, etc.
But let’s talk for a minute about the fiscal side of things- how DO you flip a house?
Let’s start with a common industry term- ARV- or ‘After Renovated Value’. When considering a home for flipping, find out what the value of that home would be three to six months after renovation.
Once you have your ARV, look at the purchase price of the home, plus the cost of renovations (add an extra 5-10% to your estimates on renovations- because somehow problems always seem to arise!), to get your potential for profit. (You’re doing this for a profit, right!?!) Here’s your simple equation below.
ARV – (Home Price + Expected Cost of Renovations)=$$PROFIT$$
Most homes are already being sold at retail value. If they are BELOW retail value, you have to move quickly. When a home is sold below retail value, it is typically because the seller is in a position where they need/want their home sold as soon as possible. In our seller’s market, these homes go FAST! Many times, you’ll also want to purchase these homes in cash in case the home can’t get financing with certain loans or if there’s no time for typical loans. Another option in lieu of buying a home in cash is a hard money line, which is like private money lent to you that can be used like cash, but you get charged a higher daily interest fee.
Are you interested in flipping homes for profit? Have a question? Want to know where to start? Send me a message and I’ll be happy to turn your ???’s into “Ah, I get it now!”
