House Flipping 101

article image

Home improvement television makes flipping homes look so easy anyone can do it. But the reality is much different. You can make a lot of money or lose money to problems that slow down your timetable and increase your risk.

There’s a reason why flipped homes are only a small percentage, about 6.2%, of the market. As an investor, you’re buying a property to sell quickly at a profit. You have to know the market and adhere to a strict acquisition formula to meet your estimated after repair value (ARV). The ARV informs your asking price that will both attract homebuyers and meet bank appraisals.

A hot market, with a low supply of homes and rapidly escalating home values, is ideal for flipping because buyer demand and price appreciation are “built-in.” But if homes to buy are hard to find, you may have trouble staying within your budget. 

The flippers who make the most money are full-time professionals who use cash to buy homes, do all the repair work themselves, and sell the home themselves. They know the market well enough to negotiate the right purchase price and have the skills and experience to estimate improvement costs accurately and do the improvements that appeal most to homebuyers. They know how to minimize out-of-pocket expenditures such as mortgage payments, utilities, property taxes, insurance and other costs of home ownership.

Can you do the same? If not, then buying and holding a home may be a better idea for you than flipping.

Set the Mood with Lighting

article image

Every space in your home has multiple functions requiring different lighting.  Even within the same room, you’ll need multiple light sources to set the right mood for the time of day and the activities you have planned.

Lighting comes in five major categories:

General purpose – any lighting fixture that is plugged into an ordinary socket, such as lamps or overhead fixtures.
Decorative – any lighting where the bulb can be seen, such as a chandelier, bathroom strip lighting, pendant lighting or sconces.
Track or Recessed – lighting that is usually a floodlight or spotlight in tracks or recessed fixtures.
Specialty – unusual lights found in appliances or furniture such as cabinet lighting and appliance lighting.
Outdoor – lighting that is specially designed for use outdoors such as security lights, lamp post lights, porch or entry lights.

The key to mood lighting is temperature. Lighting is either cool or warm, so the bulb you choose can put out yellow, soft white, bright white or natural daylight. Smart bulbs connect to mobile devices to be turned on and off, dimmed or brightened, or color changed with an app.

Layering your lighting gives you more options. Overhead lighting on tracks, ceiling fans, or recessed lighting provides central lighting. Floor lamps or torchieres, uplights, and downlights can accent architectural features and art displays. Sconces add stylish indirect light anywhere you place them.

Be sure to check any fixture you buy for the manufacturer’s instructions on the type of bulb and maximum wattage allowed.

About Earnest Money Deposits

article image

When a buyer and seller agree on a purchase price and terms, the buyer shows the seller a sign of good faith in the form of earnest money. This money, typically 1% to 3% of the sales price or whatever is customary for the local market, is deposited with an escrow agent or title company, a neutral third-party that serves to finalize the transaction for both sides.

Earnest money is designed to protect the seller. It shows the buyer is serious, but if the buyer doesn’t follow through with the contract, the seller could lose valuable marketing time when the transaction doesn’t close. They’ll have to start all over again to market the home. There are also opportunity costs – the seller could have possibly sold the home to a different buyer and perhaps for better terms. For that reason, the seller can keep the earnest money.

This also protects the buyer. The buyer can get out of a sales contract and get their money back if contingencies outlined in the purchase agreement aren’t met. Typical contingencies are that the buyer’s lender agrees to make the loan, the appraisal meets or exceeds the sales price of the home, the home passes inspection or that the buyer sells their current home before closing on the seller’s home.

Earnest money paid upfront in the transaction means the buyer has to come up with less money at closing or the deposit can be used as part or all of the down-payment.