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Five Rules to Flip Your Property

Flipping a property can create a substantial profit for the homeseller, according to published reports. If you're thinking of doing the same, you need to follow the AmericanHomeGuides.com's five rules for flipping your property to make a substantial windfall.

1.) Buy a sound, well-located home without major defects:  Most home buyers aren't looking for major fixer-uppers. However, minor cosmetic repairs are the most profitable way to enhance a home's market value.

Additionally, if you presume a house is in a decent location and doesn't require major renovation, then is the perfect profit candidate. For example, paint is the most profitable cosmetic improvement of all. Spending $1 for paint often produces $5 or more in increased market value.

Other examples of profitable cosmetic improvement include new carpets and hardwood floor refinishing, fresh landscaping, new light fixtures, and updated window coverings.

But try to avoid a home that needs unprofitable structural improvements such as a new roof or foundation repairs.

2.) Ask how much the seller paid for the home: This might seem like an irrelevant question for a homebuyer to ask but it's very important.

If the seller has owned the home for many years, he or she probably paid a low purchase price compared to today's market value. That means the seller has lots of room to negotiate on price and terms.

However, if the seller purchased the home for a price close to today's market value, that seller doesn't have much room to negotiate on the sales price, considering the condition of the residence.

3.) Purchase below market value to compensate for the obvious need for repairs: A few naive sellers believe their home -- that needs cosmetic repairs --
will sell for just as much as a similar home down the street that sold in excellent condition.

But savvy homebuyers negotiate hard, and emphasize to sellers and listing agents that the market for a home that needs fixing-up is very limited.

Prospective homebuyers seek near-perfect homes but buyers of fixer-uppers should be rewarded in the form of a lower purchase price, because they have to fix up the house.

If the seller put their home on the market to "test the waters," then it might be a good idea to look elsewhere. However, if the seller is highly motivated, such as moving to a retirement home, a job transfer, or permanent change of station then the seller is unlikely to hold out for an exorbitant asking price.

4.) Buy from a highly motivated home seller:

5.) Look for affordable financing: As long as mortgage interest rates continue to rise, it's smart to look for affordable mortgage financing. One good source is the home seller.

For example, retirees who need extra retirement income are the best source of seller refinancing. If you discover the reason for the seller's move is to move to a retirement home, then the seller probably needs the profits for extra income.

If the seller receives an all cash sale, then he or she can expect to receive between 3 percent and 4 percent interest from the bank. But if you offer the seller 5 percent or 6 percent interest, secured by a mortgage on the home they know so well, you can obtain bargain financing and also help the seller.


* Bonus tip: Don't buy a home that requires a lot of work. Performing your own "Extreme Makeover: Home Edition," can take months, even years if there's a lot of work to be done. Choose a home that needs minor renovations.

Flipping a home is not for the faint of heart. A lot of money, time and effort will go into this endeavor. But, the rewards can be great if you choose to follow the rules.

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