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You can flip a coin, flip-flop on a political position, or flip someone the bird. But only one type of flip potentially reaps thousands of dollars in sweet, sweet profits: flipping a house.
For those who aren't up to speed on all this (where have you been for the past 10 years?), house flipping involves buying and renovating a property to resell at a profit. To be sure, it certainly isn't a sure path to riches. As the hit HGTV series suggests, you can Flip or Flop.
So here's the news: Although business isn't quite as good as it was during the height of the housing boom, you can still make serious money. Check out the before-and-after pics of three properties below and what those involved have learned about flipping.
'Find homes with distinctive features'
Twenty-eight-year-old Adam Ailion of Re/Max Town and Country in Georgia has flipped 12 properties -- with three more in the works. His experience has taught him to avoid homes that need major structural modifications. Instead, Ailion sticks to buying dated homes that need cosmetic upgrades to make a "conservative $30,000 profit."
Standard upgrades include "putting hardwood floors in the living areas, redoing secondary baths with nice fixtures and tile, and adding granite and stainless-steel in the kitchen," says Ailion. If the cabinetry is salvageable, he paints it and installs new hardware. And unless they're fairly new, he'll usually replace the roof and HVAC system, too.
If you're looking to flip, Ailion advises buying homes that have "special features that others in the area lack." This could be a basement, a large or level lot, above-average square footage, a bonus room or main-floor bedroom, multiple fireplaces, a fenced yard, or even a shed. Avoid homes on a busy street, steep driveways, or a property that backs into power lines.
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'Sweat equity will only get you so far'
In 2015, after years of talking about flipping, longtime friends Jenn Furr and Jennifer Hall created Magnolia Properties of Raleigh. For their inaugural project, they purchased a house at a foreclosure auction for $110,000, then spent $15,000 on materials and contractor services to spruce it up. The final sale price -- after reviewing four offers in one week -- was $148,500. Approximate profit: $23,500.
That sweet sum comes from the two friends knowing what they could handle renovating themselves -- and, more important, what they couldn't. So their most important piece of advice for the DIYer out there, know when a project is beyond your expertise.
"Sweat equity is valuable, but hiring the right professional upfront can save time, money, and gray hairs," says Furr.
Another important point to remember in flipping is that "you'll always go over budget. Always!" says Furr. That's why the team adds 10% for unforeseen expenses to its overall budget. And if it purchases a property sight unseen or before a professional inspection, that contingency percentage goes up.
One final tip: Know what the market will support before buying a home to flip. Attracting buyers in some neighborhoods might require spending more on high-end appliances and hardwood floors, says Hall. "But in other areas, new carpet and paint may be all that's needed."
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'Prepare for your estimates to be off base'
The gross profit for the home in the pics below? A whopping $434,000. Here's the breakdown:
- Original purchase price: $638,000
- Renovation costs: $278,000
- Sale price: $1,350,000
"Some of the best margins on returns can come in a fix and flip," says David Hansel, president of Alpha Funding Solutions, based in Lakehurst, NJ, which provides loans to other real estate investors who fix and flip homes. "That said, there are a lot of moving parts to a project."
Pitfalls include underestimating the cost of repairs and the time to complete a project as well as overestimating the eventual sale price.
Hansel's top piece of advice to would-be flippers: due diligence.
"Pick an area and get to know it well. If you're focused on a particular market, you'll know a good deal when you see one," says Hansel.
Next, build a solid team: "A good contractor is worth their weight in gold, since the construction component is the one area where things can go really wrong." Make sure the contractor is licensed, get references, visit other houses they worked on, and have them provide detailed budgets to avoid unknowns.
Other core team members should include Realtors, appraisers, attorneys, and, of course, lenders. And when it comes time to flip, Hansel emphasizes the importance of staging the home.
"It will not only help you get more money but will get the house sold quicker."
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More from realtor.com: The Features That Help a Home Sell Fastest