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Just a couple of years ago, if you are in the business of flipping houses, it would have been near impossible to find great properties that you can buy and sell off quickly. Flipping houses is not a new business model. Many investors and real estate brokers have been involved in flipping houses to make a quick profit. In brief, here is how it works.

In order for this business model to work, you must first find a property that you know you can sell off quickly at a profit. How do you do that? You can do so when you have your key metrics at your finger tips. The key metrics are: market value of the property, the asking price of the property, and the potential selling price of the property. Let’s take a look at each metric, and see how they come together to help you make the right decision.

1) The market value of the house.

Every house has a market value. The market value of a property is the dollar value of similar properties in the area. Not everybody knows the market value of a house. Sometimes, even the homeowners are not aware of the market value of their own homes. That’s because they are not in the real estate industry, and they do not follow property trends. You can easily ascertain the market value of a property by having a qualified valuer value the house. Even without a proper valuation, you should have a good idea of how much the house is worth.

2) Asking price of the property.

When times are good, demand for property is high. Therefore, the asking price during such times may even be higher than the actual valuation. That’s why it is difficult to find great deals while the economy is booming. It is not impossible though. It just takes more time and effort.

However, during a downturn, jobs are lost, and many homeowners may be forced to sell their properties at low prices just to meet their financial obligations. Now is the time to grab as many bargains as you possibly can.

Of course, as you acquire the properties, you should always keep in mind that since it’s the downturn, there may be a lack of buyers. If you really want to flip houses in 2009, then you must be confident of the third point.

3) The potential selling price of the property.

This is what separates the professionals from the amateurs. The professionals already have a ready pool of customers. They are likely to be in the real estate business longer than most people, and they have a wide network of contacts. When they buy a property, it’s very likely that they already know the potential selling price of the property. In other words, they have a few ready buyers in mind.

This helps to minimize risks. The pros are confident that they can flip the houses and make a quick profit. The amateurs may just buy, and hope to sell off quickly. When that doesn’t happen, they get stuck with the property, and run into cash flow problems.

If you are serious about flipping houses, be sure to learn as much as you can about this trade.

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Investors interested in refurbishing and reselling distressed properties often want inexpensive repair work, but it is important to avoid a contractor scam. Any contractor who offers significant discounts, makes large promises, asks for a lot of money up front, or wants to work without a contract should be avoided.

If you wish to start flipping houses for profit, you will need to work with contractors in order to rescue distressed property so that they’re ready for resale. However, some scam artists prey on new investors, especially, by posing as contractors. Since a scam contractor can cost you thousands and can severely reduce any profits you might expect from house flipping, you’ll want to watch out for:

1) Contractors soliciting door-to-door. Very few professional contractors need to do this. While some legitimate contractors may use this marketing technique, you have no way of tracing the legitimacy of a contractor who solicits this way.

2) Special prices or discounts that seem suspiciously low. Be especially wary if you are told that you must sign up right away in order to get special pricing. Be extra suspicious if you’re asked to give money up front in order to qualify for the special pricing. Professional contractors may occasionally offer a discount, but they do not do so with a hard sell and they cannot afford to offer hugely slashed prices while also offering quality work. If someone is offering to do the work for a fraction of its actual price, you need to wonder where the corners will be cut. You also need to consider that some contractors who are scam artists will slowly increase the price of the work as they go along. Therefore, that surprisingly low figure will end up being a much overcharged amount by the time the job is done.

3) Contractors who want to work with no contract. Some contractors will try to make it sound as though they work on just a handshake. You should never have any contract work done without a legal contract in place. A contract protects both you and the contractor, so any professional contractor will naturally want to have a contract in place. The contractor who does not have a contract in place knows that he or she can walk away at any time, since no official agreement was made.

4) Large down payments. About a third of the total cost of materials is generally the maximum down payment required. Be very suspicious of anything that requires a larger down payment.

5) Long-term warranties and lifetime guarantees. Coming from a contractor who has not been in business very long, these may simply not mean much because there is no guarantee that the contractor will be in business for very much longer. Also, many of the very long-term warranties only apply to parts, rather than labor. Therefore, you or your future house owners will still be responsible for large share of the costs of any repairs. If you are flipping houses for profit, you’ll want to make sure that any warranties can be transferred over to the new owners as well.

6) No business address. Look out for contractors who only have a PO address, a single private phone number, or no good way of getting in touch. These people can easily disappear overnight. Look for contractors with an established retail business or an address that has been around for at least a year or more. Make sure that you can track down the contractors if anything does go wrong. When flipping houses for profit, the last thing you want to have to deal with is a shoddy repair job and a contractor who has suddenly skipped town.

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Nowadays, real estate market always changes its supply and demand quickly. While some people want to sell their house in haste, the other is going to buy house immediately. To you, this is a good chance, because you can earn much money from the change. But the efficiency is low. If you want to ensure your high successful rate, you’d better make use of internet and learn how to flip houses online.

Step1

Evaluate your potential property. There are no guarantees in real estate. However, if your property meets certain requirements, you can make an educated guess about how investors will react. For example, a property needs to have a fair amount of equity in it for the investor to justify the sale. Also, if the property needs repairs, you will need to get estimates for these as well as comparable prices on other houses in the area. Once everything is factored in, the investors will still want to see a significant profit potential at the end. For example, a house that appraises for $100,000 and that needs $20,000 in repairs will not be a good candidate if the seller wants $70,000 for it, because that leaves the investor with only about 10 percent equity after he completes the repairs. Obviously, you should consult with a financial professional for help in determining if a property is viable.

Step2

Get the property under contract. If you determine that the property is worth trying to flip, get it under contract. Your contract needs to allow you to assign the contract to another investor as well as protect you in the event that the property does not flip so that you are not stuck with the house. You can find contracts for this type of thing online, or you can hire a lawyer to draw one up for you (see Resources below). You should never use a contract that has not been approved by your lawyer.

Step3

Build a page on your blog with the details about the property. Once you have the property under contract, build a blog page devoted to this property. It should include every single detail you know as well as address issues that the investors may have, such as why you do not keep the property for yourself if it is such a good deal. This particular issue is easily resolved by pointing out that you simply do not like to hold property, but prefer to flip because it is easier, even though a long-term investor makes much more money.

Step4

Notify your email list of investors that you have a property. Send your list of real estate investors an email that directs them to your blog page where they can learn all about this property opportunity. Let them know how to get in touch with you if they are interested in doing the deal. Do not give them contact information for the seller, or you may find yourself excluded from the deal.

Step5

Select the most promising investor and work with her to do the deal. You can do the due diligence work yourself or make that part of the investor’s responsibility. Before the contracts are signed, you should run everything by your lawyer again to make sure that everything is properly written up.

Step6

Take your cut and remove yourself from the transaction. Generally, you will receive your cut when the transaction closes. Remember, once you sign the papers, this is no longer your deal, so you do not need to field phone calls or help with due diligence unless your contract stipulates it.

Sell Your Real Estate

One of the trendiest real estate investing techniques around today is called “flipping or wholesaling real estate”. This technique is so popular because it requires no real investment money, no credit requirements and pretty much, no real estate investing experience. It’s the age-old process of buying something at wholesale cost and selling it retail, but with a slight twist, you actually sell the product without ever owning it. Once you complete the sale the investor can walk away from the closing table with anywhere from 10 to 50 thousand dollars on average.

By now I’m sure you can see why this method might be so well liked especially among beginning real estate investors. There are several so-called real estate gurus out there selling books, cd’s and tapes on the subject for hundreds of dollars but this is one the easiest investing techniques to do.

Let’s explore what flipping houses entails.

An investor locates an under valued house, preferably a property that needs only cosmetic repairs or what we like to call a “sugar coat deal”. This means a house that will only need paint, carpet windows or some other very minor repairs, definitely no structural issues or roof replacement deals. You really want a house that has been neglected a bit, one that the seller hasn’t kept up very well. These types of properties can be spotted very easily because they stick out like a sore thumb in a well-kept neighborhood. The paint’s peeling, the grass is uncut, it needs replacement windows, etc.

Plus you will make the most profit from finding the worst house in the best neighborhood, if that makes since. You want to do this because when it comes time to sell, you want to be able to get the highest value, make your profit, while leaving some equity on the table for the homebuyer.

Once you’ve found this type of property, then you need to put it under contract and lock up the deal. There’s a couple of ways this can be done.

1. You can put an option on it.

(What’s an option?)

A unilateral agreement binding the seller to selling a property to you exclusively, for a predetermined price, but at a later date sometime in the future.

2. Have the seller sign a purchase agreement that gives you say, 90 days to close. This is called a buyer favorable purchase agreement. It is designed to help you, the buyer.

3. Land contract or contract for deed.

(What’s a land contact?)

A contract used in a sale of real property whereby title to the property remains vested in the seller until the buyer who receives the right to possession has paid in installments over a long period of time a preset amount or all of the purchase price and upon default by the buyer all payments may be forfeited. Also known as a Conditional sales contract, an Installment sales contract and a Real property sales contract.

There’s a few other ways to lock up a deal also, just make sure you don’t spend any money until you have the deal secured but let’s move on.

When you have secured the deal, then you start making the necessary repairs to bring the property back up to the neighborhood standard. That’s when I like to start looking for a buyer, while I’m actually making the repairs, just to get a head start. This makes the transaction go a little smoother.

Now remember, when you bought the house, you paid a discounted price because the home needed repairs. But now you’ve the repairs and the home can be sold on the retail market to a retail buyer. This is where you make your profit!

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In this day where every homeowner in the country have saddened about some big loss on the equity of their abode, it just seemed wise to either keep it or rent it until the housing market goes back to normal. When? No one can say. But the situation is not all that bad if you where to stay in it, of course, as long as you can keep up with paying the higher mortgage interest, and just make it a future investment. Price may not be as it used to be when you first bought it, but 5 to 10 years from now, price should pick-up and you gain substantial amount of equity out of it.

Whether you decide to keep it to live on or get it rented, one thing is sure. You want to keep your place as nice looking as it should. If you are staying, this of course if you have some money to spare, you might want to consider home remodeling, re-decorating or re-arranging for a different look and feel. You can do this on your own or with the help of your family member and friends. Maybe repainting the living room and re-arranging the furniture. Taking the clutter out and make it homier organized kind of house. Re-decorating your house not only will give you this “oh I like it” feeling, but it also gives you the sense of pride and relief that you might say to yourself, yeah, I’m glad I did not sell it. You maybe even say, well, it’s not all that bad after all. Your friends might even like it and have you do the re-decorating of their house for a fee! That’s just a thought.

However, if you really do need some cash to help you pay the increased payment in mortgage, in lieu of selling (first of all you cannot sell as the housing inventory is too high up), consider get it rented. But how can you compete with what’s available in the rental market in your neighborhood with the same layout, square footage, number of bedrooms and bath, etc? Mind you, a lot of them if they look old, rundown or even just the ordinary bare looking with no accent whatsoever take a lot longer to get a rented. Once again, think about home remodeling or home improvement. Home remodeling does not need to be very pricey. You just need to have a clear picture of what you want done, check out the prices of materials you need, how many days it will take and so on. If you are thinking of doing it yourself and you’re crunching with the time, then take a few days leave if you have some. But for those who doesn’t and cannot for whatever reason, you might want to consider hiring a home remodeling or home improvement contractor.

Hiring a home improvement contractor does not necessarily mean getting someone just down the street because “maybe” you will save some money. The average carpenter Jose down the street can probably do the job and he’s cheaper. I don’t necessarily agree. Regardless if you’re hiring Jose down the street, or hiring a licensed contractor, there should be a few things you need to consider before deciding who to hire to get the job done and do it right with a lot less money.  I say, look around, local yellow pages or Google it and look for home remodeling resource network. Most of these companies can connect you to the right candidate in your area with the following credentials: 1) they are licensed and bonded;  2) they have liability and workers compensation insurance, and 3) highest approval rating from Better Business Bureau (BBB). Most of the time, they would send you up to 3 pre-screened contractors and on top of that, this service along with the job quote is FREE for you. They will not charge you a dime as they deal directly with the contractor for whatever fee they charge. By doing this, the expense is within your affordability, the job is done to your instruction and specification and more importantly, in a timely manner.

In closing, I say whatever you decide, keep in mind some, if not all the pointers I shared with you. You ultimately decide what’s best for you. Just a hope that it is one wise and intelligent decision so it makes a long lasting productive effect for the future!

This article is an original copyright of Claire Schaper, online media specialist for All Around Home Remodeling.  You can also visit http://www.allaroundhomeremodeling.com.

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When buying a television or appliance it is best to shop around. But when looking for a service provider like a hairdresser or dentist do you really want the one that charges the cheapest price? The same is true with a home remodeling contractor. The general advice people receive when they are considering a construction project is to solicit bids from at least three contractors. But do you really want the cheapest contractor? Are you going to make your choice based only on price?

I’d like to introduce you to an alternative to competitive bidding which you may not be aware of, a negotiated bid. This is not a situation where you haggle the price with the contractor. Rather, you and the contractor become allies in making your project a reality.

The procedure for negotiating a bid goes usually goes something like this: First, you pick a contractor you like and trust before the design process has begun or is in its early stages (there are many ways to find a good contractor; referrals from friends, NARI.org or NKBA.com). You and the contractor work together as a team to develop a project which fits your needs as well as your budget. This is a simple explanation of the negotiated bid process. You’ll probably require a bit more information before being sold on the concept but before we move on let me draw your attention to a few key words which need to be understood in context: trust and team.

This is a different relationship than most people have with a contractor. The contractor is a valued member of the team. He gives his input during the design process and based on his knowledge of construction and what really happens on construction sites he contributes valuable information to tweak the design in order to maintain the budget. It is a powerful collaborative effort.

During this process you will become more educated about the impact of each decision you make and how they affect the overall cost of the project. You will be pushed to think through details and make decisions early in the process. This is one of the best ways to control the dreaded “budget creep”!

Additionally the contractor will be able to let you know what alternatives are available and how they can affect both cost and design. For example, suppose you want to add French doors and add a deck outside your kitchen. The initial design idea shows a door which will have to be custom made, with transom windows above. The contractor’s preliminary estimate on the deck and door work is more than your budget. However, by collaborating with the contractor it is determined that a simpler stock French door unit will significantly lower costs. As you can see, the contractor is working with you to create a project that call be built within your budget but still satisfy your desires.

Another significant point to consider is that you and the contractor will have developed a good working relationship. All too often in a competitive bid environment the potential exists for a design professional to be aligned with the owner against the contractor in an adversarial relationship. If all parties involved are working together this is less likely to happen.

It must be made clear that the contractor is most likely not going to give you his time and advice for free. Remember that he is bringing you a wealth of knowledge that may save you a substantial amount of money and aggravation. You should understand that during this pre-construction planning you will be charged for the time that your contractor spends. Some contractors request that they be paid an hourly rate for the planning work they do; others might request payment only if, for some reason, they don’t end up doing the job. In any case, this usually runs between 4 percent to 8 percent of the overall cost of the job, depending on the size of the project. This is well worth the investment as the contractor’s input before construction might save you thousands of dollars.

Should you put your project out to bid? Or should you find a contractor whom you can work with to negotiate the project? If you are concerned with overall value, the quality of the construction process, as well as the quality of the work itself, and you want few I surprises, I strongly suggest you negotiate the bid.

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Do you need a kitchen remodeler? You definitely do if you plan to change a major aspect of your kitchen. Not having a remodeling expert is simply not an option because the kitchen is one of those places you cannot manage redoing yourself. Here are some important tips in looking for and working with a remodeling company.

Look in the Right Places

There are so many remodeling contractors. It’s hard to figure out which ones have the best services at the right prices. You can’t just pick one from directories. You have to be sure that your company is reputable and can get the job done well. The key is to look in the right places for a remodeling outfit.

- The most basic source of a good kitchen professional is to ask for recommendations. You can ask from your friends or expert forum sites. You can also spend some time reading company reviews to get an idea on which companies are highly recommended.

- There are service sites that create directories for remodeling companies. Some of these sites will only have companies that they have already carefully screened and considered. It is a good idea to pick a kitchen remodeler from one of these sites. You are at least assured that you have a fairly reputable and excellent company.

- Other sites specialize in project bidding. You can provide these sites with details about what you want. Member remodeling companies can then bid for your project. This is a great option if you want more quality companies giving you more value for your money.

Know What You Want

You may not be an expert. It is still a good idea though to have a clear concept about your kitchen and your project. You should know such basic things as your existing kitchen lay-out, your expected changes and your desired end result. Unless you have these points clearly in your mind, your kitchen remodeling project will fail. Even the best kitchen remodeling outfit will not be able to get the job done well if you don’t even know what you want. In other words, you should have a comprehensive plan to stick to.

Listen to Your Contractor

Knowing what you want is crucial. It is however, also equally important to listen to what your contractor thinks about your plan. Since you are not an expert, there may be things that just aren’t possible. Be ready to adjust your plans according to what your contractor thinks is advisable.

Set Things Clear

Agree with your chosen contractor. This goes beyond agreeing over the job price and the kitchen design. Your contractor also has the right to know specific house rules and protocol. This is important because the workers of your contractor will be working inside your home. You may for example, want to caution them against smoking.

Kitchen remodeling is a great idea. That is only if you can find a great kitchen remodeler and work well with them. Spare yourself from regret by getting and setting things right with your remodeling company.

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