Want to make thousands of dollars in Real Estate? Flip houses

Want to make thousands of dollars in Real Estate? Flip houses. Want to lose thousands of dollars in Real Estate? Flip houses.

Reality TV makes it look so enticing. Find a diamond in the rough, polish it up and re-sell it. Part of the challenge is finding and knowing what is a diamond in the rough. Another important part is the money side. Knowing what to spend and where it will give the best return. In other words it must pay after ALL the expenses are figured in.

Let’s say you find your diamond for $150,000, and you figure it needs a new kitchen, 2 updated baths, some new flooring, and painting. You get your contractors bids in and the reno’s comes to $30,000. You go ahead and complete the work and actually come in on budget (not gonna happen) so your investment is $180,000.

You call in your friendly neighbourhood real estate rep (that would be me) to get his opinion on the value of homes in the area that are in excellent condition, because after your reno work, yours is perfect. The new value you are told is $210,000. Wahoo you just made $30,000 for 3 months works.

Uh – no you didn’t. You need to figure a selling time of 4 to 6 months. Sure it may sell faster, but you better be ready if it doesn’t. You need to figure in carrying costs while it sells. So if it takes 5 months to sell that’s another $5,000 out of your profit. Real Estate fees, legal costs, land transfer tax (on your purchase price), maybe heat if it is a winter project, and property taxes and another $15,000 is gone. So you are left with $10,000 for all of your hard work.

Still it is not a bad return. But you MUST control your costs. You can see from the figures above if anything goes over budget you lose money. So as I said at the start, want to make thousands of dollars in Real Estate? Flip houses. Want to lose thousands of dollars in Real Estate? Flip houses.

Jamie Woodend
Sales Representative
Remax a-b Realty Ltd Brokerage
88 Wellington Street
Stratford, Ontario, N5A 2L2
519-273-2821 ext 229 Office
519-949-0345 Cell