Flipping Houses For Dummies, 3rd Edition

Ralph R. Roberts is a master at flipping houses, earning a profit even in the deeply depressed real estate market in Metro Detroit, Michigan. He is the award-winning author of several books, including Foreclosure Investing For Dummies. Joe Kraynak is a freelance author and writing consultant who has written and coauthored numerous books on a wide range of topics. He is a valued partner and advisor to many For Dummies authors.

Introduction 1

About This Book 1

Foolish Assumptions 2

Icons Used in This Book 3

Beyond the Book 4

Where to Go from Here 4

Part 1: Getting Started with House Flipping 5

Chapter 1: Brushing Up on the Basics 7

Grasping the Concept of Flipping 7

Flipping Legally and Ethically 9

Determining Whether You Have What It Takes to Flip 11

Devising a Reliable Flipping Strategy 12

Building an All-Star Team 12

Finding and Buying a Flippable House 13

Rehabbing Your Fixer-Upper 14

Profiting from Your Venture 16

Chapter 2: Do You Have What It Takes to Flip? 17

Tabulating Your Time Budget 18

Shaking Your Piggy Bank 21

Taking Your Personality Pulse 24

Gathering the Essential Tools of the Trade 26

Chapter 3: Devising an Effective Flipping Strategy 29

Surveying Different Strategies 29

Drawing Up a Detailed Plan in Advance 36

Plan B: Surviving a Flip That Flops 38

Chapter 4: Building Your Dream Team 39

Teaming Up with a House Hunter — a Quality Real Estate Agent 40

Recruiting Moneymen (and Women) 44

Consulting a Title Company and an Insurance Agent to Cover Your Back 47

Locating a Valuable Appraiser 48

Adding a Real Estate Lawyer to the Roster 49

Lining Up a Home Inspector 50

Hiring Contractors and Subcontractors 52

Chapter 5: Securing the Funds to Fuel Your Flips 57

Recognizing the Importance of Being a Cash Buyer 57

Tapping Your Own Resources for Cash 58

Leveraging the Power of Other People’s Money 63

Using Conventional Financing (for Longer-Term Real Estate Deals) 68

Part 2: House Hunting with an Eye for Flipping 77

Chapter 6: Scoping Out a Fertile Neighborhood 79

Pinpointing House Flipping Hot Spots 80

Sizing Up the Local Real Estate Market 83

Comparing Neighborhoods 85

Considering Other Neighborhood Factors 87

Chapter 7: Hunting for Houses in Your Target Area 93

Focusing Your Search on Affordability 93

Digging Through Property Listings, Ads, and Publications 95

Mining Special Markets for Dontwanners 102

Chapter 8: Closing In on Foreclosure Properties 105

Getting Up to Speed on the Foreclosure Process 106

Brushing Up on Local Rules and Regulations 107

Picking Your Point of Entry into the Foreclosure Process 110

Purchasing Foreclosure Properties Step by Step 120

Advertising to Generate More Leads 126

Chapter 9: Scoping Out Properties in Special Markets 127

Acquiring Properties in Probate 127

Scooping Up Bargains in Bankruptcy 131

Finding Government-Owned Properties 137

Buying Properties at Tax Sales 140

Part 3: Evaluating Properties and Crunching Numbers 141

Chapter 10: Researching Distressed Properties 143

Creating a Property Dossier 144

Checking Out the Property 145

Following the Paper Trail 148

Chapter 11: Inspecting the Property and Estimating Rehab Costs 161

Packing for Your Inspection Mission 162

Finding the Perfect Candidate for a Quick Makeover 165

Assessing Potential Curbside Appeal 166

Taking a Big Whiff, Inside and Out 168

Inspecting the House for Big-Ticket Items 168

Discovering Some Promising Features 173

Arriving at a Ballpark Figure for Repair and Renovation Costs 176

Chapter 12: Calculating Your Profit and Maximum Purchase Price 177

Doing the Math to Ensure a Profitable Flip 177

Estimating a Realistic Resale Value 180

Accounting for Expenses 181

Chapter 13: The Art of Haggling: Negotiating a Price and Terms 189

Planting the Seeds for Successful Negotiation 190

Making an Offer They Can Refuse (But Will Consider) 191

Tending to the Details: Inspections, Appraisals, and Walk-Throughs 196

Closing the Deal 200

Part 4: Fixing Up Your Fixer-Upper 201

Chapter 14: Prioritizing and Planning Your Renovations 203

Developing an Eye for Home Improvements 204

Prioritizing Your Projects 205

Delegating Duties 208

Drawing Up a Tentative Budget 211

Coming Up with a Game Plan 213

Chapter 15: Giving Your Property a Quick Makeover 217

Sprucing Up the Yard 217

Freshening the Façade 220

Touching Up the Interior 222

Chapter 16: Perking Up the Curb Appeal 229

Revitalizing the Landscape 230

Tidying Up the Driveway and Walkways 235

Making Entryways More Inviting 237

Refreshing the Outside Shell of the House 239

Glamming Up the Garage 242

Chapter 17: Dazzling the Crowds with Updated Kitchens and Baths 245

Giving Kitchen Cabinets, Countertops, and Sinks a Facelift 246

Modernizing Kitchen Appliances 250

Updating the Bathrooms 253

Chapter 18: Tackling Moderate Makeovers 261

Installing Replacement Windows 261

Replacing Drab, Weathered Doors 265

Putting on Your Own Floor Show 269

Chapter 19: Reconfiguring Spaces and Other Structural Overhauls 273

Attending to Essential Structure and Infrastructure Repairs 274

Fiddling with the Floor Plan  or Not 274

Identifying Load-Bearing Walls 275

Maximizing the Use of Existing Space 277

Building New Rooms from Scratch 282

Adding a Deck or Patio 283

Part 5: Cashing In: Realizing Your Profit 285

Chapter 20: Considering Your Options: Cash or Cash Flow? 287

Setting a Goal: Cash or Cash Flow 287

Cashing Out: Selling the Property 288

Exploring Cash-Flow Possibilities 290

Chapter 21: Marketing Your Home 297

Harnessing the Power of a Real Estate Agent to Market and Sell Your House 298

Setting an Attractive Asking Price 301

Staging a Successful Showing 303

Offering to Help Secure Attractive Financing 304

Becoming a Real Estate Marketing Maven 305

Chapter 22: Negotiating the Sale to Maximize Your Profit 311

Comparing Seemingly Similar Offers 312

Mastering the Art of Counteroffers 317

Shuffling Papers and Other Legal Stuff at Closing 320

Chapter 23: Trudging through Some Taxing Issues 323

Estimating the Tax Man’s Take from Your Flipping Profits 324

Maximizing Tax Savings from the Sale of Your Principal Residence 325

Slashing Your Capital Gains through Careful Deductions 329

Deferring Taxes: Rolling Your Gains into Your Next Purchase 330

Selling Your Home at a Loss (Ouch!) 331

Paying Income Tax: When Flipping Houses Becomes Your Occupation 331

Part 6: The Part of Tens 333

Chapter 24: Ten Ways to Find Dontwanners 335

Cruising the Neighborhood 335

Teaming Up with a Great Real Estate Agent 336

Checking Classified Ads and Online Listings 336

Skimming Foreclosure Notices 337

Monitoring Tax Sales 337

Scoping Out Bank-Owned Properties 338

Probing Probate Properties 338

Digging Up Houses in Bankruptcy 339

Sifting through the Government’s Stash 339

Networking and Advertising for Leads 340

Chapter 25: Ten Signs of a Great House Flipping Opportunity 341

The Location Is an Obvious Hot Spot 341

Nobody’s Home 342

The “For Sale By Owner” Ad Is Shrinking 342

The Seller Is Highly Motivated to Be Freed from the Burden of Ownership 342

The House Is Ugly Outside 343

The House Is Ugly Inside 343

The Decor Is Outdated 344

The House Has Character 344

The House Has Undeveloped Living Space 344

The Property Backs Up to Nothing 344

Chapter 26: Ten House Flipping Blunders 345

Falling for a Scam 345

Speculating on the Housing Market 346

Waffling on an Obviously Good Deal 346

Backing Yourself into a Contractual Corner 346

Failing to Inspect the Property before Closing on It 347

Assuming the Title Is Clear 347

Underestimating the Cost of Repairs and Renovations 348

Doing Shoddy Work to Save Money 348

Over-Improving a Property 348

Forgetting to Pay the Taxes 349

Index 351