Research Before Buying a House to Flip
We are constantly trying to help our readers find the best way flip a house and learn about flipping a house for profit. The cost to flip a house can vary but you are less likely to run into problems if you right house to flip.
Please read our guides that we have designed as a flipping houses beginners series, but we have no doubt they can help remind even experienced flippers about things they have forgotten over the years.
When you are looking for that home to buy and an flip, especially the first one, remember to do the research we have speak about on our site and pick he perfect location. Of course, these things are always important but the worst thing that can happen to your confidence is to fail on your first flip. Therefore, be picky. VERY, VERY picky on your first project!
Try and stack every single variable in your favor. Later, you can take a few more risks if you want but on that first flip wait until the stars align.
When you are doing your research below are some of the things you should look at:
- Pay attention to the average sales price of the houses in the area you are looking at. Unless there has been some major economic change you should look at the prices for the last 12 months and compare them to the previous 12 months. If the market is moving fast you might want to figure the average sales price each month for the previous 12 months and graph the prices on a month to month basis for the previous 12 months. I said graph because that will give you a visual representation of what prices are doing. We are a visual being after all.
- You next want to compare that average price per square foot just like you did above. This will help you to compare like houses. A 7000 square foot may sell for less per square foot than a 2000 square foot house. Therefore, you should break down your analysis based on a square foot range and a total sales price range to get accurate figures.
- Look at the number of sales versus the number of total listings in the area you are researching. This will tell you whether the buyers or sellers are in control of the market. Obviously, you want to see the sellers in control.
- Similar to the above, you need to consider the number of listings as compared to the number under contract. This can help confirm the paragraph above and give you an even better idea of the strength of the market (or weakness).
- Once you have this information you need to get together everything else you can about the neighborhood you are looking at. Look at school ratings, crime, traffic, noise, etc…
If you need help finding housing and economic data you can check the National Association of Home Builders (NAHB) on their website www.nahb.org
They track statistics on a number of things including home sales and prices, forecasts and economic impact, financial and mortgage markets, state and local data and construction statistics. They create a number of indexes that can be somewhat helpful in giving you an overview of the house flipping market such as Housing Market Index (HMI), Housing Opportunity Index (HOI) and Remodeling Market Index (RMI).
The NAHB can give you a wide variety of useful information as a house flipper or wholesaler on building materials and how the general economy is affecting the housing market. They even have nationwide surveys you can view.
Some other sites you can look at are:
Of course, do not forget about the standard multiple listing service (MLS). There is a lot of good information on all of these sites that you can pull together to make your house flipping a little less risky.
A great deal of money can be made remolding houses or flipping houses as long as you do your research and are patient. The worst thing you can do is NOT do your research. That is why we write a lot about research and finding the right house to flip.
Remember: You make money when you buy the house, not when you sell it.
The best homes to flip are ones that:
- Is in a great location, particularly a historical area.
- It currently does not have good curb appeal but that can be easily improved.
- It needs little or not work to its plumbing, electrical system, foundation and roof.
- Basically just needs cosmetic work inside and outside.
- It has old kitchens and bathrooms that can be easily remodeled.
If you want a list of red flags then consider these potential major problems: mold damage, fire damage, termite damage, environmental issues, foundation damage, structural damage, water damage, major systems replacement, landslide problems, zoning violations and roof damage.