If you are interested in buying property to flip in the Bay Area, it helps to understand exactly what is involved. House flipping involves buying a home or real estate, in order to turn around and sell it for a profit. While this sounds fairly straightforward, it can actually be very complicated and there are many decisions you will need to make; this includes deciding where you should buy, what upgrades you should pay for, and what you will do if something goes wrong.
Inexperienced flippers often make the wrong decisions because they are considering their emotions rather than viewing the transaction from a purely financial perspective. An experienced investor, however, will know that things can and will go wrong, market conditions can change and always have an exit strategy in place.
Flipping property is as much an art as it is a science. When you buy property in the Bay Area, you will often be dealing with individuals who are losing their homes to problems beyond their control and emotions usually run high. You must also cover all of your bases; including making sure disclosures are in order.
Cost of Flipping Property
House flipping in the Bay Area is an expensive prospect, and you will face many costs, including interest rates, junk fees, pre-payment penalties, holding costs, property taxes, agent commissions, repairs, hazard insurance and much more.
This means you must have a realistic budget in place before you begin. Your budget should include unforeseen costs, often 20-25%.
Succeeding in House Flipping
The following tips can help you succeed if you plan to start property flipping in the Bay Area.
- Never overpay for the home in the hopes that you will somehow make a profit.
- Do not let emotions come into play, as property flipping is a business.
- Go into the deal understanding your “after-rehab” value.
- Pay attention to market conditions, because you will lose money every day that the home is on the market, if it isn’t priced well and the market slows down.
- Make sure you have a home inspection done and walk through the home with a contractor.
- Learn to build great relationships with contractors in the Bay Area, who will make or break the project.
- Keep it simple. Concentrate on updates that will appeal to the most buyers and the items that will be most apparent to buyers walking through the home. Be careful not to over- or under-build the property for the area but make sure your standards for the work are high.