In this special series of HowTos we will look at the in’s and out’s of home buying and selling for a profit. There are many different levels of investors in the home improvement business and no matter where you start you should have an understanding of what you wish to accomplish and what it will take to get it done.
For some people it might just mean that they want to sell their current home and move up to a better one but for others they may want to have this trade as their profession.
So, lets cover the basics.
In order to resell houses for a profit you need to first purchase a home. If you are not willing to buy homes then you are a Realtor someone that helps others buy and sell houses or you are a remodeling contractor someone that comes in and fixes homes for a real estate investment business, both of these careers are great but they are totally different thing then a house flipper. And in both cases either a Realtor or a remodeler you are trading the safety of not investing a lot up front for the loss of large profit in the end.
Now that we know that we have to actually buy a house or other property what type of property should we purchase?
This answer is simple the property that you always want is the one with the lowest investment (purchase price + remodeling cost) and the highest return or (sales price – investment = profit).
There is not much more to it then that and that is the biggest hurdle that you have to overcome as a new property investor.
The basic math is buy low, invest little, sell at current market value or just below.
Remember you will not be living in the home you resell…. and if you are a starter investor that decides that they can live in the home during the remodeling stages you should prepare yourself for quickly moving out of the property and not investing any sentimental aspect because this is business.
But is the property market dead right now?
Should I even try to do this?
The fact is the property marked will never die as long as people continue to have children. As more children move out of their families homes more housing needs to be built. In some locations where the average age of the local residents is senior citizens or very young you will see that the housing market will be different then in locations where home owners are now in their 40’s and have children just graduating college or high school and needing either rental or single family homes to buy…..
Areas around colleges will always need a high level of rental housing as will resort areas. If you are willing to hold on to your investments you may even find that renting for a period of time will cover your costs and build equity in your property while you wait for property values in your specific area to increase. This is an aspect of understanding your market and getting the most out of your investment.
So thats it? Thats all we need to know?
No, actually there is a lot more to it but this is the basic goal of any investor.
Purchase something, Add Value to it, and then resell it for a higher but fair market price.
In other HowTos we will cover the details of Property Selection, Loans or Working Capital, Time Requirements, working with contractors and Realtors and many of the overlooked problems that the first time investor gets stuck on.