Flipping Houses For Dummies

Flipping houses profitably may not be easy, but it's far from impossible. With the right guide, you can avoid the risks and reap the rewards like a seasoned expert. Flipping Houses For Dummies is that guide.

The perfect blueprint to property resale, this book walks you through the absolute necessities of house flipping. You'll learn how to confirm that you have enough time, energy, cash, and resources to be successful. You'll also get an inside look at the house flipping process that'll show you how to minimize risk and maximize profit in a highly competitive market.

Flipping Houses For Dummies offers:

• Proven negotiating techniques to close real estate deals faster
• House flipping laws and regulations for every state in the union
• Strategies to successfully complete a big renovation, on-time and on-budget
• House flipping tips for both investors and contractors
• Comprehensive content on hiring and working with reputable contractors

So, if you're ready to start revitalizing your community by turning neglected properties into prize homes, Flipping Houses For Dummies is the first and last resource you'll need to navigate your way around the exciting and challenging world of real estate investment.

Ralph R. Roberts is a real estate expert, investor, and author. He has sold over 10,000 homes, and focuses on affordable housing. He wants to help everyone become a homeowner! Ralph is the author of the previous edition of Foreclosure Investing For Dummies, as well as many other publications.

Introduction 1

About This Book 1

Foolish Assumptions 2

Icons Used in This Book 3

Beyond the Book 4

Where to Go from Here 4

Part 1: Getting Started with House Flipping 5

Chapter 1: Brushing Up on the Basics 7

Grasping the Concept of Flipping 8

Spotting distressed properties 8

Doing your homework 8

Making a few minor (or major) alterations 9

Reselling your rehabbed property 9

Flipping Legally and Ethically 10

Flipping illegally 10

Flipping legally: Buy, fix, sell 10

Determining Whether You Have What It Takes to Flip 11

Devising a Reliable Flipping Strategy 13

Building an All-Star Team 14

Finding and Buying a Flippable House 15

Rehabbing Your Fixer-Upper 15

Planning repairs and renovations 16

Applying makeup 16

Making a good first impression 17

Focusing on kitchens and bathrooms 17

Making moderate changes 17

Tackling structural enhancements 17

Profiting from Your Venture 18

Chapter 2: Devising an Effective Flipping Strategy 19

Deciding on the Role You Want to Play 20

Surveying Different Strategies 20

Buy into a hot market 21

Buy low, do nothing, sell quick 22

Buy low, apply makeup, sell quick 22

Buy low, renovate, sell high 23

Buy low, move in, renovate, sell high 23

Buy, hold, lease 24

Invest in new construction 24

Focus on a niche market 26

Flip contracts (or do it all on paper) 27

Cook up your own strategy 27

Drawing Up a Detailed Plan in Advance 28

Plan B: Surviving a Flip That Flops 30

Chapter 3: Building Your Dream Team 31

Teaming Up with a Quality Real Estate Agent 32

Recognizing the value of an agent 32

Picking an agent with the right stuff 34

Recruiting Moneymen (and Women) 36

Finding financiers 36

Hiring an accountant 37

Obtaining sound investment advice 38

Covering Your Back with Title and Homeowner’s Insurance 39

Locating an Experienced Appraiser 40

Adding a Real Estate Lawyer to the Roster 41

Lining Up a Home Inspector 42

Calling In Your Rehab Team 44

Chapter 4: Securing the Funds to Fuel Your Flips 47

Recognizing the Importance of Being a Cash Buyer 48

Tapping Your Own Resources for Cash 49

Shaking your piggy bank 49

Unleashing the equity of your current home 49

Cracking open your retirement nest egg 53

Leveraging the Power of Other People’s Money 54

Persuading a bank to finance your flips 55

Passing the hat among friends and family 56

Borrowing from a private (hard money) lender 57

Making up the difference with a gap loan 58

Partnering with an investor 59

Using Conventional Financing (for Longer-Term Real Estate Deals) 59

Determining what you’re worth in dollars and cents: Net worth 60

Checking and correcting your credit report 61

Avoiding mistakes that can sabotage your loan approval 64

Comparing loans 65

Finding lenders online and off 66

Borrowing for purchase and renovations with a renovation loan 67

Part 2: House Hunting with an Eye for Flipping 69

Chapter 5: Scoping Out a Fertile Neighborhood 71

Pinpointing House Flipping Hot Spots 72

Tracking migratory patterns 72

Tagging promising neighborhoods 73

Finding your focus 74

Identifying areas in your price range 75

Sizing Up the Local Real Estate Market 76

Tracking the appreciation rate 76

Noting how many homes are currently for sale 77

Discovering how long houses stay on the market 78

Comparing Neighborhoods 78

Spotting the signs of a good neighborhood 78

Telling when a neighborhood is in decline 79

Considering Other Neighborhood Factors 80

Grading local schools 81

Digging up crime statistics 83

Exploring the business climate 84

Getting the lowdown on planned neighbourhood improvements 85

Chapter 6: Hunting for Houses in Your Target Area 87

Developing a List of Criteria to Guide Your Search 88

Focusing Your Search on Affordability 90

Digging through Property Listings, Ads, and Publications 91

Searching listings with the help of your real estate agent 92

Scanning the classifieds for keywords 96

Skimming real estate magazines 96

Scoping out For Sale By Owner properties (FSBOs) 97

Mining Special Markets for Dontwanners 97

Cruising the neighborhood for dontwanners 98

Tapping into special markets 98

Advertising to Generate More Leads 101

Chapter 7: Closing In on Foreclosure Properties 103

Getting Up to Speed on the Foreclosure Process 104

Brushing Up on Local Rules and Regulations 105

Procedural stuff 106

Different types of foreclosures 107

Taxes 108

Picking Your Point of Entry into the Foreclosure Process 108

Pre-foreclosure 109

Foreclosure 115

Post-foreclosure 117

Purchasing Foreclosure Properties, Step by Step 118

Step 1: Find a property 119

Step 2: Follow the paper trail 120

Step 3: Inspect the property 120

Step 4: Bid on a property (when buying at an auction) 120

Step 5: Survive the redemption period 123

Chapter 8: Scoping Out Properties in Special Markets 125

Acquiring Properties in Probate 126

Finding probate properties 126

Digging up a death certificate for more info 127

Finding out who can sell the property 128

Contacting the next of kin 128

Keeping tabs on overbids 129

Scooping Up Bargains in Bankruptcy 129

Brushing up on bankruptcy laws 130

Knowing when to purchase 131

Tracking down houses in bankruptcy 132

Digging up additional info 132

Dealing with the gatekeepers 133

Planning for delays 135

Finding Government Owned Properties 135

Buying Properties at Tax Sales 138

Part 3: Evaluating Properties and Crunching Numbers 141

Chapter 9: Researching Distressed Properties 143

Creating a Property Dossier 144

Checking Out the Property 146

Doing a drive-by, walk-around inspection 147

Snapping photos 149

Following the Paper Trail 149

Honing your title acquisition and reading skills 150

Picking details off a foreclosure notice 152

Digging up details at the Register of Deeds office 156

Gathering tax information at the assessor’s office 161

Getting your hands on the property worksheet 162

Chapter 10: Inspecting the Property and Estimating Rehab Costs 163

Packing for Your Inspection Mission 164

Finding the Perfect Candidate for a Quick Makeover 167

Poor-but-promising curb appeal 167

Cosmetically challenged, inside and out 168

A second-rate showing 168

Assessing Potential Curbside Appeal 169

Taking a Big Whiff, Inside and Out 170

Inspecting the House for Big-Ticket Items 171

Focusing on the foundation 171

Checking out walls and floors 172

Examining the siding 172

Giving the roof and gutters the once-over 173

Glancing at the windows, inside and out 173

Evaluating the plumbing 174

Exploring the electrical system 174

Checking out the furnace and air conditioner 175

Adjusting your eyes to the lighting 176

Discovering Some Promising Features 176

Arriving at a Ballpark Figure for Repair and Renovation Costs 179

Chapter 11: Calculating Your Profit and Best Offer 181

Doing the Math to Ensure a Profitable Flip 182

Adjusting for market conditions 182

Crunching the numbers 183

Estimating a Realistic Resale Value 184

Accounting for Expenses 185

Unpaid property taxes and water bill 185

Closing costs 185

Cost of repairs and renovations 186

Holding costs 188

Marketing and selling costs 189

Income tax 191

Chapter 12: The Art of Haggling: Negotiating a Price and Terms 193

Planting the Seeds of Successful Negotiation 194

Making an Offer They Can Refuse (But Will Consider) 195

Calculating a price 196

Proving you’re earnest: Money talks 196

Dangling additional enticements 197

Protecting your posterior with weasel clauses 199

Tending to the Details: Inspections, Appraisals, and Walk-Throughs 200

Inspecting the house from the ground up 200

Ordering an appraisal 203

Taking one final walk-through 204

Closing the Deal 204

Part 4: Fixing Up Your Fixer-Upper 207

Chapter 13: Building and Managing Your Rehab Team 209

Identifying the Expertise You Need 210

Finding and Recruiting a General Contractor or Subcontractors 212

Adding a Handyperson and Other General Help to Your Crew 214

Structuring Financial Agreements 214

Contracting with Your Contractors 215

Managing Your Rehab and Your Team 216

Drawing up a punch list 217

Assigning projects 217

Scheduling the work 217

Managing your team 218

Chapter 14: Prioritizing and Planning Your Renovations 221

Developing an Eye for Home Improvements 222

Prioritizing Your Projects 223

Tackling essential repairs 224

Gauging renovations to get the most bang for your buck 225

Adding inexpensive, last-minute touches 226

Delegating Duties 226

Identifying do-it-yourself projects 227

Getting a little help from your friends 227

Flagging jobs that require professional expertise 228

Drawing Up a Tentative Budget 229

Coming Up with a Game Plan 231

Switching on utilities and ordering materials and a dumpster 231

Tackling underlying problems first 232

Working from the top down 233

Working from the outside in, or vice versa 233

Allotting sufficient time for your projects 234

Chapter 15: Giving Your Property a Quick Makeover 235

Sprucing Up the Yard 236

Freshening the Façade 238

Touching Up the Interior 241

Revitalizing the entire interior 241

Updating the kitchen 244

Spending quality time in the bathrooms 245

Modernizing the bedrooms 246

Making the basement look livable 246

Attending to the furnace and hot water heater 247

Chapter 16: Perking Up the Curb Appeal 249

Revitalizing the Landscape 250

Doing the bare minimum 250

Revitalizing a tired lawn 250

Designing an adequate landscape 251

Prepping areas for planting 252

Positioning and planting your greenery 252

Adding the final touch: Fresh mulch 253

Maintaining the landscape 253

Tidying Up the Driveway and Walkways 254

Asphalt driveways 255

Concrete driveways and walkways 255

Stone or brick walkways 256

Making Entryways More Inviting 257

Refinishing the front door 257

Refurbishing the front porch 257

Adding some finishing touches 258

Refreshing the Outside Shell of the House 258

Laying a new roof 259

Repairing or replacing gutters 260

Retooling the siding 260

Glamming Up the Garage 262

Chapter 17: Dazzling the Crowds with Updated Kitchens and Baths 265

Giving a Facelift to Kitchen Cabinets, Countertops, and Sinks 266

Refinishing or replacing cabinets 267

Updating hardware: A cosmetic fix 268

Resurfacing or replacing countertops 269

Installing a new sink and faucet 269

Modernizing Kitchen Appliances 270

Deciding whether to install appliances 270

Adding or replacing the dishwasher 271

Roaming the range, oven, and cooktop 271

Installing a space-saving microwave 273

Keeping, removing, or replacing the refrigerator 273

Updating the Bathrooms 273

Repairing bathroom walls and floors 275

Refinishing or replacing tubs and showers 276

Dealing with la toilette 277

Updating the sink and medicine cabinet 278

Adding or improving ventilation 279

Chapter 18: Tackling Moderate Makeovers 281

Installing Replacement Windows 281

Knowing your window options 282

Trimming the cost of new windows 284

Replacing Drab, Weathered Doors 285

Making the quick fix with a new storm door 285

Replacing an entry door 285

Repairing or replacing sliding glass doors 286

Installing new interior doors 287

Putting on Your Own Floor Show 287

Laying vinyl or linoleum flooring 288

Refinishing hardwood floors 288

Updating the hardwood floors 288

Laying ceramic tile for a touch of class 290

Chapter 19: Reconfiguring Spaces and Other Structural Overhauls 291

Attending to Essential Structure and Infrastructure Repairs 292

Fiddling with the Floor Plan — or Not 292

Identifying Load-Bearing Walls 293

What is a load-bearing wall? 293

How are conventional and truss roofs different? 294

Is this wall load-bearing? 294

Maximizing the Use of Existing Space 295

Knocking out walls 295

Raising the ceiling 296

Designing a whole new kitchen 296

Adding a bathroom 297

Spreading out to an attached garage 297

Transforming a porch into a room 297

Creating a room in the attic 298

Deciding whether to finish a basement 298

Building New Rooms from Scratch 299

Adding a Deck or Patio 300

Part 5: Cashing In: Realizing Your Profit 303

Chapter 20: Considering Your Options: Cash or Cash Flow? 305

Setting a Goal: Cash or Cash Flow 306

Cashing Out: Selling the Property 307

The buy-fix-sell approach: Listing the property for sale 307

The buy-sell strategy: Selling to another investor 308

Exploring Cash Flow Possibilities 308

Refinancing to cash out the equity 309

Reselling a foreclosure property to the previous owners — or their family 309

Leasing the property to the previous owners 312

Offering a lease-option agreement 313

Assigning your position to a junior lienholder 314

Chapter 21: Marketing Your Home 317

Harnessing the Power of a Real Estate Agent to Market and Sell Your House 318

Knowing why you should hire a seller’s agent 318

Negotiating with an agent during the selling process 319

Taking advantage of your agent’s access to the MLS 320

Setting an Attractive Asking Price 320

Don’t be greedy 321

Understand the current market 321

Know the price you need to make the profit you want 322

Staging a Successful Showing 322

Recognizing the value of staging 323

Making your staging checklist 323

Offering to Help Secure Attractive Financing 324

Becoming a Real Estate Marketing Maven 325

Choosing a method of contact 325

Planting a For Sale sign on your lawn 326

Listing your home online 327

Designing, printing, and distributing flashy flyers 328

Advertising your home in the classifieds 329

Hosting an open house to build word-of-mouth buzz 330

Chapter 22: Negotiating the Sale to Maximize Your Profit 331

Comparing Seemingly Similar Offers 332

Does the buyer have financing? 332

How “earnest” is the buyer? 334

What else is the buyer asking for? 334

What conditions has the buyer included? 336

How soon does the buyer want to close? 336

Mastering the Art of Counteroffers 337

Submitting a counteroffer 338

Leveraging the power of multiple offers 339

Shuffling Papers and Other Legal Stuff at Closing 340

Having the right folks represent you 340

Prepping for closing 341

Sealing the deal with paperwork 341

Chapter 23: Trudging through Some Taxing Issues 343

Estimating the Tax Collector’s Take from Your Flipping Profits 344

Maximizing Tax Savings from the Sale of Your Principal Residence 346

Proving “principal residence” 346

Qualifying for the two-out-of-five-years rule 347

Taking the ownership test 348

Splitting hairs: Special circumstances 348

Slashing Your Capital Gains through Careful Deductions 349

Deferring Taxes: Rolling Your Gains into Your Next Purchase 350

Selling Your Home at a Loss (Ouch!) 351

Paying Income Tax: When Flipping Houses Becomes Your Occupation 351

Part 6: The Part of Tens 353

Chapter 24: Ten Ways to Find Dontwanners 355

Cruising the Neighborhood 355

Teaming Up with a Qualified Real Estate Agent 356

Checking Classified Ads and Online Listings 356

Skimming Foreclosure Notices 357

Monitoring Tax Sales 358

Scoping Out Bank-Owned Properties 358

Probing Probate Properties 359

Digging Up Houses in Bankruptcy 360

Sifting through the Government’s Stash 360

Networking and Advertising for Leads 361

Chapter 25: Ten Signs of a Great House Flipping Opportunity 363

The Location Is an Obvious Hot Spot 363

Nobody’s Home 364

The “For Sale By Owner” Ad Is Shrinking 364

The Seller Is Highly Motivated to Be Freed from the Burden of Ownership 365

The House Is Ugly Outside 365

The House Is Ugly Inside 366

The Decor Is Outdated 366

The House Has Character 366

The House Has Undeveloped Living Space 367

The Property Backs Up to Nothing 367

Chapter 26: Ten House Flipping Blunders 369

Falling for a Scam 370

Speculating on the Housing Market 370

Waffling on an Obviously Good Deal 370

Backing Yourself into a Contractual Corner 371

Failing to Inspect the Property before Closing on It 371

Assuming That the Title Is Clear 372

Underestimating the Cost of Repairs and Renovations 372

Doing Shoddy Work to Save Money 372

Over-Improving a Property 373

Forgetting to Pay the Taxes 373

Index 375

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