I plan to own a home so that I can make some money off of it. I was thinking Should I buy and flip or just build one from scratch. The location I wish to do this at is very cheap to live and more people rent rather try to own a home. I am thinking about a duplex, to double my money. So here are my questions, please answer correspondingly.
1. Should I flip or build?
2. How much money should I have to start. I will obviously need a loan, but how much cash on hand should I have available?
3. How much does it even cost to get a home built? Where can I find out?
4. How do you pick a neighborhood?
Please include any other information that you feel might be helpful.
Thank you!! First off, you should be able to invest atleast 20% cash, either in the repairs or in the building, and still have reserves to cover the payments while you are carrying the loan.
Building takes months of work, especially if you buy undeveloped land (that doesn't already have the well/septic/hookups available) Flipping is generally a better route to go IF you can find the right property. An amatuer can quickly underestimate costs for building AND flipping.
It varies to build a house-- check yoru local classifieds and then go visit the model homes of those that advertise "houses on your lot from $35 a sq ft!"
You pick a neighborhood based on the fact that the house you are flipping is the WORST house, or atleast at the bottom. YOu always want the rest of the houses to look better than the one you're buying-- so when you flip it, it fits in and the buyer pays more. NEVER buy in a junked out neighborhood becuase the house itself is an easy flip- the buyers will not like the area. Right now the market is not that good. If you plan to flip make sure you can afford 3-6 months payments. Since the shows have started on TV everyone is trying to flip houses. Think about watching for the ones that are getting repossessed from those first timers and sell them.
That depends on what you plan to build or the repairs that need to be done. Not enough info to answer.
Call a builder and ask what the cost of building is in your area.
Look at it and think about your grandmother living there. There are several things you need to know when buying foreclosures and flipping properties.
Flipping is easier than building,though after you have been in the business for a few years you might consider it as it is a progression.
First of all you should go to the nearest book store, purchase several books on buying, fixing and flipping properties. There are several that you might be interested in.
You will also want to find out if your state is a non-judicial or judicial foreclosure state. This will assist you in making offers as well time frames in which you have to work in when purchasing a foreclosed property.
Once, or, while you are doing this you should buy one of the TV guru's distressed property programs. These programs will give you some legal forms you might use when writing an offer to purchase a property. You will also find several scripts to use in taking to your potential clients. The also give you tips and a formula on how to figure if you have a property that you can make money from before buying.
If you are without funds to accomplish this business, you will have to find some investors that will assist you. You will have to make a deal with them about a certain percentage of the profits made from the sale of the property. You will have to advertise in your local newspaper for these type individuals to assist you in buying and flipping.
Normally this is 50/50 however it could be more or less depending on how your relationship is with the investor.
Now to purchase a foreclosed property depends on what phase the foreclosure is in.
#1 Pre-foreclose- the owner is still in the home, he has been notified that he is in foreclosure. Now he has to come current or the foreclosure will continue.
You can make an offer to the owner at this point, give him something in his hand to purchase his equity. Now you will also want to see if there is any repairs that need to be done on the property. If there is you need to know the cost of this repair. You will need to know how many months he is behind in his mortgage payments as well as any fees that the lender has incurred in trying to collect the mortgage payment. Now add these together to include what you had to give the homeowner. Also you must include how much you will need to hold the property, I mean making the mortgage, paying the insurance and taxes while you repair the house for sale.
Now find out the balance of the mortgage add this to the above figure. Now you need a method of finding out the current value of the property. All this information will tell you if you have a deal or not.
#2 The other way to purchase a foreclosure is when the property goes to sale. At this point you must have all cash and you must be able to prove that you have whatever the minimum bid is in cash, cashier鈥檚 check or money orders. If you have no proof you will not be allowed to bid.
#3 One last way is after the sale. If no one bid and get the property at the foreclosure sale, you may find out what bank owns the property, write an offer as well as a check as a deposit not to be cashed until the offer has been accepted. You might also inform them as to how and when you plan to come up with the remainder of the sales price. I have know some lenders to accept offers this way before the property is turned over to a real estate broker to sell.
Now you have to determine how you are gonna market yourself to get.
#1 You can purchase a pre-foreclosure list from a list broker (Join the crowd most do this and mail letters to the person that is in foreclosure)
#2 You can advertise in your local paper that you are in the business of purchasing foreclosures.
#3 You can do a direct mail to people in your city stating that you are now in the foreclosure business.
#4 You can do the research at the county recorders office yourself (time consuming and tedious-but workable. You should get enough leads for a least one days work.)
#5 You can select an area of your city that you want to work and target your that area with your energy. You can walk the area pass out flyers that you are now in the business of buying property distressed, divorced and foreclosures as well as probate property.
Pass out these flyers for at least 2-3 months after which you should go to a newsletter of some sort while still explaining that you purchase properties.
After passing out the flyers for 2-3 months you should follow that up with a newsletter to the same area. Check with the post office and inquire about a bulk mailing stamp. This is a more economical way of mailing business matter.
You will want to form a professional team to assist you in your new career field, which should be composed of but not limited to an attorney, cpa, tax preparer, notary public, title rep, real estate agent and others that you feel will make you successful.
They should pass out your business card to their clients that need your services and you should pass out their cards to your clients that need their services
I hope this has been of some use to you, good luck
"FIGHT ON" If you are trying to make money you should not build a home ever--unless you are actually an experienced builder for a living. Building is the most expensive way to buy/own a home, generally.
But you shouldn't assume you can easily flip a house either. What makes you think you can get someone else to pay more than you did? "Flipping" is when you buy a house and immediately sell it for more than you paid--which is hard to do because it's expensive to buy/sell a home. You have to pay closing costs, commissions, etc.
The best/easiest way to make money through real estate is simply to own a home and live in it. You borrow only a fraction of the cost (80% or less is best), but you make money off the appreciation of the whole house. So each month your loan amount goes down as you pay your mortgage, but simultaneously the value of the house goes up with the market! So your home equity grows unbelievably fast. Then when you sell eventually, you should have lots more money than you invested/put down. But this takes time--years.
Better yet when you decide to move you can rent out the house instead of sell it. Then your home equity continues to grow AND you get a monthly "paycheck" from the tenant. This is also hard to do, but can be easier if you've already built up equity in the home.
You should have enough in cash to cover 6 months of living expenses (including the mortgage) before you buy a home. Utility costs, taxes, and maintenance will be more than you expect, not to mention closing costs. And once you move in, if you lose your job, you can't just move or downsize like if you're renting an apartment. You still have to pay the mortgage. So have a cash cushion before you begin. |
