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Develop Rough BudgetThis aspect has been running through your mind since you gave thought to flipping a house. If it is your motivation to make a profit, then why should it not be on your mind, constantly.So you think, if I pay this much, make these repairs, and sell for this amount, what is the difference which I can keep to make the effort worthwhile?The rough budget is just that. A set of numbers which reflect what you kind-a know about each property you are considering buying. The numbers will be no where near specific enough to make a decision on which property to buy to flip. But they will help you drop off the list any properties where you feel you can not make a profit.Then make a comparison between the cost of a property to you, and what other properties are selling for in the same area. This will give you the dollar differential amount you need to know if this flip is the right one for you at this time.You are looking for the greatest difference between what your cost will be and what other properties of a comparable type are selling for. Note that this is based on what the property sold for. Not the asking price.Anyone can ask a million dollars for a house. That is not a good number to use for a $250,000 house when making a comparables evaluation. So go back to the list of what you found at the municipal office for sold properties in the area. That is what you want to compare against.This does not mean you can not keep an eye to what houses are listed for in the neighborhood. There may be an increase in value due to other factors which may not be reflected in the recently sold prices on properties in the same area.Without regard for what specific repairs are needed for each of the properties, just do the math. Do a lot of guessing here. There may be properties which are over valued without repairs. Avoid these over priced properties, obviously. You will only know if the properties you are considering are overpriced by becoming informed.
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Prepared 2006-2010 David Ullian Larson |