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Flipping Your First Home Can Be Successful

Flipping properties has been happening for a long time, so it may be something with which you are familiar. There are two fundamental methods for flipping a home. The first, and most common method, is to first purchase a home, fix or update it, and then sell the home for a higher price. The other way that people flip homes is to purchase property during a time when property prices are down, and then selling the house once the market goes back up. While waiting for the property prices to go back up, you can rent out the home to produce some income.

Finding Property to Flip

Those who are successful at flipping property know that location is key. Flipping property only works if the demand for homes is strong in that area. Study area sales. If there is a neighborhood with a few homes on the market that haven't sold in months or years, you'll need to avoid that area. The longer a home sits on the market, the farther the sales price drops before it sells.

One way to purchase inexpensive properties is by searching for bank foreclosures. These houses may or may not require renovations or repairs, so make sure you have a reliable home inspector who can tell you if there are issues that need attention. Bank foreclosures can cost thousands less than the price of real estate in that area. Once repairs are made, you stand to earn tens of thousands in profit when the house sells.

You can also look for homes with owners who may not have been able to keep up with the necessary repairs. Often, these homeowners are willing to drastically cut the price of their home in order to sell quickly. Again, you will need to make the repairs to up the home's value before you sell it, but there is still a lot of money to be made.

Those who are skilled in property flipping tend to look for one of four words in real estate listings, because they signify desperation on the seller's part:

-Fixer-Upper
-Foreclosed
-Must Sell
-Vacant

Financing the House you Plan to Flip

Recent changes in the world of mortgages are making it more difficult to gain financing for flipping homes. Nevertheless,it can be done. It's more possible if you have equity in your home already. You'll borrow the money using your home as collateral and then pay it back as soon as the property you are financing sells. You can also take out a mortgage listing the property as an investment for rental, but make sure you understand any stipulations made by the bank.

Regardless, any bank offering you a mortgage loan to flip a house will generally loan 80 percent of the home's value. You need to find other ways to gain that other 20 percent; many have used credit cards or unsecured lines of credit. Keep interest rates in mind when selecting these options. If it takes months to sell the home, you'll be paying on your credit cards in the interim.

The best way to finance a home you plan to flip is by finding a loan officer who has handled them before. If you find the right lender, it's possible to gain funding for 100 percent of the home's value, plus an additional percentage towards renovations.

Pay Attention to the Terms

Most importantly, make sure you are comfortable with the terms. Many mortgage lenders require you to keep the home for up to six months before selling the home. If you have to wait six months, plus the amount of time it takes to find a buyer and transfer the property, you will be making mortgage and loan payments while you wait. You'll need to have enough income to cover these expenses.