Flipping Real Estate in today's real estate environment can be tricky business. If you are seasoned pro then you may move on from this article. We're going to be writing to those looking to begin in real estate investing and flipping.
Flipping Houses Takes Money And Time
First thing is first. Is your financial house in order? If you do not have a little cushion to rely on while you are rehabbing and reselling your property, then you could be in trouble. Two major factors that often get overlooked by new real estate investors is extra costs for unseen repairs and extended marketing time in case the property doesn't sell right way. This second one is especially nasty if you are buying the property with a mortgage. If your finances are not sufficient for you to be in it for the long haul, you may consider beefing up your bank account and looking at this again in a year.
Buying A Fixer Upper To Live In, Rent, Or Flip
Ok, your finances are fine, and you have money to give you the ability to cover extra costs and an extended time frame until you sell your finished home. The next thing to consider in flipping a home is whether you are going to live in it while you rehab the home, are you going to use the home as a rental, or are you merely looking to fix up the property and immediately sell it. If this really is your first home, it might be smart to buy the home to live in while you fix it up. The rest of this article presents why you ought to live in your rehab property if it is your first investment property.
First Time Flipper - Live In It First
Why live in it while you fix it? If you are living in the home, you virtually have no huge time pressure to get the home completed before you can sell it. If you have to finance it to buy it, then you will not have two housing payments while you are rehabbing. Nor will you have additional expenses associated with another property like utilities and real estate taxes.
As you get into a rehab project you are most likely going to find problems with the property that you didn't expect. Yes, it could be as bad as the Money Pit. But let's hope not. For example, you could find that you need to replace the flooring under a leaky toilet when you pull up the laminated tile floor. Or you could find that you have far more extensive termite damage in your front porch floorboards than you inititally thought. Each of these projects could set you back weeks, perhaps a month or more if you are the one doing the work. By living in the property you can fix these problems on your own schedule.
If You Have To Finance Consider FHA Rehab Loan
If you have to finance it, you can get far better loan programs and interest rates if you plan on living in the property as your primary residence until you sell it. One option for financing a home that needs repairs is with an FHA rehabilitation loan or also known as a 203(k) loan. This loan allows you to not only borrow money with little or no money out of your pocket in combination with the AmeriDream down payment assistance program but you can get money for most of the costs of the upgrades that you want to make. You can also get money to make energy efficient home improvements which is something to strongly consider as energy prices are going up and don't seem to be heading back down anytime soon.
What If I Cannot Sell Right Away?
This is perhaps one of the biggest arguments for why you might want to live in your first rehab project until you sell it. Time can kill you and it doesn't get any better over time. Time cures all wounds - not in this case. In 2008, there are parts of the country that average time on the market times of 11 months. Can you imagine not knowing this and having to hold a property 11 months before you could sell it. It would be even worse to find out that you can't sell your property after you rehabbed it and then didn't have the cash to carry the property. Give yourself some leeway and live in it until you sell it.
Disadvantage of Living In A Rehab Property
Two things come to mind right way: your home will probably always be a little messy and dusty. If you are married with or without kids make sure that you both come to some agrrements about how messy the house can be or for how long you are willing to put up with it. You would be surprised how many couples I have talked to who never discussed this very thing and it ended up causing a great deal of problems in their marriage.
You have to be somewhat mobile. If you are living in the home and all of a sudden you get a purchase offer you will need to have a backup living plan. This might be tough to do if you have kids. Make sure, again if you are a couple that you have talked through the challenges of having to move quick. As a single person, this isn't nearly the issue as it is as a couple.
Fixing and flipping properties is a great way to make money, but it is something that has to be addressed with caution. For your first property, you may want to consider living in it to save money and ease the time pressure of having to get it done.
