Real Estate: Secrets to Successful House Flipping in Pekin, IL

Flipping houses is a high-risk task, and is not as easy as you see on TV, but can come with indefinite benefits and great rewards when successful. When you are prepared financially to invest in a property, it is important to know the local market thoroughly says, Local Records Office from Pekin, IL. The only way you will truly know you found a great deal is by knowing the market value of comps in the same area.

Get a real estate license

Having a license will give you access to the local multiple listing services. You will get the benefits of knowing both the asking and selling prices and it will make you aware of properties as soon as they post on the market and help you find real bargains.

How to make a profit

Before you consider making the right offer, do a lot of research on the comps in your area of interest and be sure you also look into rentals in the area to make sure it is a property also suitable for renting. Research how much rentals are going for in your area, and it is a sufficient amount to cover the mortgage, interest, taxes and property insurance with a preferable bit extra to generate a profit.

And be ready to purchase when you find the right deal because it is a very competitive market. Choose a house that is an area of interest and where buyers want to live, “just because the house is priced low doesn’t mean it’s a good value. You’re not going to be able to force those neighborhoods to be good” says the Local Records Office. Cost of repairs

Bidding wars start to develop and with a highly competitive market making homes prices spike, it is important to be sure to have a reasonable ballpark of how much repairs cost before making an offer. Figure in the purchase price plus the costs of repairs, and whether or not it exceeds the market value.

Prepare to do some of the work yourself, because hiring a contractor is not always necessary when it comes to minor repairs. Calculate the cost and time and figure the value of how much you pay someone else. Do not over-do it on repairs, and base your expense of repairs off of the area, because you may not get your money back. Also, Adding that special touch of quality fixtures can go a long way and do not cost that much.

Have plenty of funds

Expect to make a full 20% deposit on the property, because mortgage lenders do not typically lend more than 80% of a non-owner occupied property.

In case the lender is expecting that you plan to flip the property, you may not be eligible to get a "purchase money mortgage on the property at all" says the Local Records Office. You will have to “consider a higher priced commercial loan arrangement, or you will need to pay all cash.”

Also, be prepared to have plenty of cash for repairs. Most of the time it is unlikely to get a home equity line of credit on a home to make repairs on a non-owner occupied property, so that means you need to pay for most repairs as an out-of-pocket expense.

Borrowing funds from family members or friends or having a partner to help you is an option. A major key to figuring out the costs is to include the property purchase price, repair costs, marketing expenses, and carrying costs (mortgage, insurance and utility payments).

There may also be unforeseeable events that will occur on a property and require more money, so make sure to have extra money set aside for the worst-case-scenario. You do not always know what is behind the walls, and these issues arise with purchasing older homes. When you turn the house around to sell, it will only be priced to sell based on today’s market and not based off of what you spent.

You can make money flipping a house. Just be ready for a learning curve as you work on each property because you will need to understand it all in order for it to work in your favor.

As you are watching “house flipping” shows and thinking “that’s easy money?” You may want to consider thinking again because it is definitely not as easy as it looks. And you may want to “take the time to weigh out the pros and cons” before taking that big leap towards investing all your hard-earned time and money.

Pros of flipping homes

Flipping homes can become very profitable in a short amount of time, for those that can work on it full-time. It gives you the capability to practice negotiating skills. It also allows you to be your own boss, so to speak, such as: delegating tasks, managing your time and you also learn and gain experience in both the real estate and construction fields.

Renovating is about creating a new property, and bringing it to life. It is making a new place for families to create memories in. And you are also helping by improving both the street and the neighborhood.

Cons of flipping homes

Buying a home from an auction, where you find the best deals, inspections are lacking as the home is usually "sold as is". Many issues may arise and you may want to consider all the risks before moving forward and wasting all of your time and money because it is a gamble.

Some major issues to name a few: cracked foundation, asbestos, mold, plumbing, electrical, can certainly erase your profits. In other words, there is also a high potential for unexpected costs resulting in a loss of money and time.

Fluctuations in the market prices can also make the home unable to sell and creates holding costs.

“The availability of contractors is also a consideration. Even investors who are skilled contractors themselves may need to bring in subcontractors to get the job done. In a hot real estate market, labor costs will go up and it may be difficult to find the skilled labor needed to make your desired upgrades in a timely manner. And in flipping, as everywhere, time is money.” says, Local Records Office

It is a stressful and time-consuming business, as special rules may apply to flipping properties. So be sure to “check out with a mortgage banker” first. Make sure to consult with a mentor, and have quality resources who know the business. Seeking out for professional advice “when you reach a breaking point can become extremely valuable.”

Renting Versus Selling

"Healthy neighborhoods should have only a handful of vacant properties at any given moment, even if they are being marketed for rent or sale," says Brian Davis, a Real Estate investor and teach in rental investing (at Snaplord.com). When they are a large number of properties up for rent or sale, it is usually not a good sign. Also, when looking to resell in the future, you will have many difficulties in finding a homebuyer.

One of the many strategies in real estate is to turn your property into a rental instead of flipping, and it will create a cushion for a long-term growth potential, for when you are ready to sell.

And with many homeowners downsizing towards rental properties, rental properties are on the rise, “About 13.3% of renter households made more than $100,000 in 2016. That's up from 9% in 2006.”