Get Focused for Successful Flipping

There are essentially two types of real estate investors, those who buy homes with the intention of re-selling them for a profit within a relatively short time-frame, and those who want to rent out the home, ideally collecting a monthly profit and then eventually selling for a profit much further down the road.

Buying a home to resell it quickly is often referred to as flipping. There are a small handful of vocal millionaires out there that got rich doing this, but that doesn't mean it's easy. Flipping inevitably requires doing some improvements to a home, which means an investment of more time and money, on top of the purchase price. So in order to do this, an investor needs enough capital to purchase the real estate, pay the mortgage while they are making the improvements, pay for the materials and labor to do the improvements, and also have enough time to either manage or carry out the improvements. This alone is no small task. Then comes the challenge of choosing the right time to sell so that a worth while profit can be made. I think it can confidently be stated that, with the exception of the very rare circumstance, flipping a home is not the path to easy money. However, if one has the necessary capital at their disposal—including time and energy—it can be a financially rewarding job. The key to successful flipping is to concentrate your energy to the most worth while improvements.

Painting the exterior is often cited as the number one improvement that increases the value of a property. This is because it works on the first impression of a buyer. If the first impression is a cute and fresh home, the buyer instantly has an open mind, and wants to see more.

Other key areas for buyers are kitchens and bathrooms, so improving these can usually gain financial rewards. Important improvements include replacing old and worn-out fixtures with more attractive and efficient ones and adding more attractive flooring. Adding another bathroom goes a long way towards increasing the value of a home.

Flooring is also important. Many older homes have beautiful wood floors in them that, over the years, have been covered with caret, linoleum or laminate flooring. While covering wood with these other flooring options obviously seemed like a good idea at the time, now, far more people want the original wood. So ripping up old flooring, scraping off any adhesive and then sanding and sealing an original wood floor can add tremendous appeal for buyers. If they want carpets, they'll buy area rugs.

This current appreciation for original and "character" features, brings up another important point. Resist the temptation to succumb to the latest siding trend. A home in a neighborhood I often drive through recently sold, and the new owners are ripping off the vinyl siding that was just put on about ten years ago. They are exposing the original wood shingle siding, and choosing to repair the damaged ones and then paint them. The house looks quite cute, and given that it is in a neighborhood of restored character homes, I think restoring the original siding is a smart move on the part of a new owner. So save the waste, and avoid vinyl siding unless the original finish is truly, irreparably destroyed.

Finally, worthy improvements include structural repairs. A new roof, for example, always ads value to a home. If there is mold or pest-related damage within the walls, take the damaged materials out and replace them. If you don't, a buyer will miss appreciating all the superficial improvements you've done, and see a structural nightmare they will need to fix. Getting rid of things like mold and termite damage, and taking steps to prevent these from recurring, will justify you charging top dollar for your investment property.

Whether or not you do all of the above improvements depends on a number of things, including the individual home's needs, your resources, and your time-frame. For each house, pick the top few things that are most needed and go from there.