House Flipping

The key to making money flipping is to finding the right property at the right price in the right area in a know condition and closely manage costs necessary to make the home sellable to a TYPICAL BUYER for this type of home. The best way to know if you can make money flipping is to start at the eventual sales price and work backwards.

Where and What to Buy

First, determine what price homes are still selling. Buying something and hoping that it will sell will likely not work out. I can help in this area. Let's say for example that homes in XXX area selling for $250,000 within 30 days. Then, you need to locate a property in that area such that once you buy the property, rehab the property and sell the property for $250,000 you still made a profit. I am oversimplifying the elements below but hopefully the following will give you an idea.

Estimate Sale Price

For our example lets use $250,000. Be pessimistic as to what the home will sell for.

Subtract all the Cost Elements

• Profit: $20,000
• Cost to Sell property: Use 8% (agent charges, transfer taxes, title fees, etc.) or .08 x $250,000 = $20,000.
• Improvement Cost. This will be different for each home. Use $20,000 as a number for example. You must get this number right or you will have serious problems later. Also, do not engage in "improvement creep". This happens too often. Also, you need to set aside a reasonable amount of the funds for the unexpected.
• Holding costs (it takes time to repair a home and to sell the home and you have to make the payments during this time): $10,000
• Acquisition costs: Use 3% of the purchase price or about $5,000

Do the Math

$250,000 - $20,000 - $17,500 - $20,000 $10,000 - $5,000 = $177,5000

Bottom Line

Based on the calculation, the MAXIMUM you can pay for the property is about $175,000. And, this has to be a property that once restored will actually sell for at least $250,000 in the current market. When you look at all the costs I listed above, the only cost you can really control is the improvement cost. It is critical that you do not over rehab the home. If homes in the area with basic stoves sell well, you do not need to install a fancy new stove; a basic stove is the right answer.

Contact me if you are considering buying or selling Las Vegas real estate. You will be glad you did.

...Eric

Eric Fernwood
RE/MAX CENTRAL
8400 W. Sahara Ave
Las Vegas NV 89117
Email: EricFernwood@gmail.com
Website: www.EricFernwood.com
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