Why buying a house to flip is a smart move

We all want the most out of our money and are always trying to find new innovative ways to do that. Buying a home in Maryland or Virginia is an investment, an investment that could potentially play itself out if you play your cards correcting. House flipping has been popular for a while, and it is growing in notoriety due to the success many have seen. House flipping typically refers to buyers who purchase distressed properties, fix them up, and then resell them for a profit. This is also called “Wholesale Real Estate Investing”. The second-quarter home flipping rate was up from 3.5 percent, or one in every 29 home sales in the nation, during the first quarter of 2021. If you are one of many who are diving into the Wholesale Real Estate Investing market and are looking for more information you have come to the right place. In this article, we will go over how “flipping houses” is a good way to invest in your future or just to have a home you helped build with your own visions and ideas. The market is always changing and an upgrade to a home is always a wise idea, lets’s get started!

What Is Real Estate Wholesaling? Real estate wholesaling is a short-term business strategy investors use to make big profits. In this strategy, the wholesaler contracts a home usually one that is distressed with a seller, shops that home around to potential buyers, and then assigns the contract to one of them.  A distressed property is a home on the brink of foreclosure or already owned by the bank. Investors often seek these properties out because of the opportunity to buy a home at a discount. However, they’re taking the risk that the property might need significant repairs. On average, real estate wholesalers can expect to make between $5,000-$10,000 in commission per property. Once you have a property, a contract, and an interested buyer, this process can move quickly. Wholesaling is considered one of the best short-term investment strategies and is a great way for individuals to break into the real estate investing industry. This is because wholesaling does not require significant capital to get started.

There is what is called a “70% Rule” in real estate and when you are looking to invest in properties to flip into profit. The 70% rule helps home flippers determine the maximum price they should pay for an investment property. Basically, they should spend no more than 70% of the home’s after-repair value minus the costs of renovating the property. Wholesale purchase is almost always made in bulk, and because of that, you pay a discounted price for the purchase. After you buy products from a wholesaler, you can then sell them at your own store at a higher price to make a profit.  The difference between the retail and the wholesale prices is called the margin.

How do you find distressed properties to possibly purchase? There are two ways one can buy distressed property via a bank auction or directly from the seller. The bank auction route is lengthier, with the bank releasing an ad, setting a date for the auction, inviting bids, collating the offers, and then finally deciding who to sell the property to. Below I will list how you can properly locate these types of properties:

1. Look For Neglected Properties.
2. Check Tax Records.
3. Find Properties With Delinquent Mortgage Payments.
4. Consider Probate Options.
5. Peruse REO & Bank Owned Property Listings.
6. Drive For Dollars.
7. Talk To Out-Of-State Owners.
8. Check The MLS.

It’s entirely possible you could flip a house with at least $10,000 to start off depending on the geographic location of the property, whether you are willing to do all the work yourself, can buy all the upgrade parts for wholesale and the ultimate price you intend to sell the house for. Understanding how much does it cost to flip a house varies depending on a variety of factors, including the property acquisition costs, rehab costs, carrying costs, and financing costs. The average cost to flip a house is about 10% of the purchase price. If you’ve done your due diligence and educated yourself on the process, wholesaling can be a very lucrative business. Wholesaling is great for new investors because it requires little to no personal finances or experience. If you feel that this could be a path for you to start investing and start flipping homes, do it! You can buy a home as a started home and then remodel, and if you decide to sell at an up cost and then take that profit and invest in another project you will soon see that it was money well spent. Find a trustworthy mortgage broker and discuss your plan and tell them what you are hoping too with your investments and let them guide you through the process.

MCS Mortgage Services has many years of experience in the realm of real estate located in Maryland and Virginia. If you are wanting to start a new path of House Flipping contact MCS Mortgage Services to see how we can help you.