In this post we look at the advantages of holding your property and renting it out for the long term.
The simple fact is, that if we owned a cow and decided we should slaughter it for meat. Then the value of the cow will be extinguished with your final bite.
It’s true you can make profit with the sale of the cow, but once it’s gone it’s gone.
But if the owner of the cow decided to milk the cow, then they would be creating a continuous revenue stream, while still holding onto the asset of the meat for an eventual sale.
But the owner of the cow can also breed the cow to make other cows, and double his initial investment. He can even choose to repeat the process and make himself a fortune on the strength of thinking outside of the box.
The same strategies can be applied to property.
Just like the owner of the cow, a property investor can make quick cash flipping houses.
But if he chooses to rent the property after he has finished renovating, he can milk the asset every time the property becomes more valuable.
If the property is the cow, then money is the milk.
Every time your property goes up, you have an opportunity to go back to the bank and ask them if you can borrow more funds against the increase in your properties value. Then you take that money, and use it as a deposit for another purchase.
You can repeat this process as long as the property market is rising, and currently it is rising fast.
Even in a recession, if you wait for the market to bounce back, which it inevitably will, and then you are still making money through rent, while you hold the asset.
When your property rises to around 10% - 25% more than you paid for it, borrow that amount in the way of a re-mortgage.
This is leveraging to buy property using the bank as your investment partner.
So what’s in it for them, you may be thinking?
Well, banks know that property is a safe investment. They also get interest payments every month from the borrower (You).
But what you get out of it, is cash to buy investments, and the payback of the loan is then deducted from the monthly rental yield you collect from a tenant.
The fact of the matter is, the tenant pays the bank their interest and covers the mortgage payment for you. You should also be taking a handsome profit after outgoings too.
So before you flip houses, stop and think about whether you should hold, rent and repeat for unlimited earning potential.
I hope you have found this tip helpful
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Invest in property or save?
Whether you're flipping houses or holding and renting; property is still one of the best ways to ensure wealth creation and long term growth.
Saving actual cash, does serve a purpose though, and that is to build a decent deposit or initial investment to acquire assets.
But why is it so important to get our hands on assets?
The answer is simple.
Cash depreciates over time; while well considered asset investment can yield a monthly income, as well as give you large capital gains when you deem the investment has matured to a desired level.
That's not to say there's no risk in investing. There is risk.
But there is also risk when we drive our cars.
That is why we must get a licence to operate a vehicle.
Just like driving, investing is as risky as our competence to do it.
For example, if a hazard comes at us rapidly as we drive, we hit the brakes and continue when the road clears.
Taking educated action when investing has the same principle.
Let's just say you purchased your property and rented it out, just as the housing market crashes. You may consider that a disaster right?
In that particular situation you must remember that yes, the market has crashed, and the value of the property has gone down,perhaps lower than you paid for it.
But if it is being rented out, and your tenant is paying you an agreed fixed rate, regardless of a crash, then even in a downturn, your investment is still making money.
The shrewd investor does not panic, selling up at a loss. Instead, they wait and take their monthly rental profits, while the market inevitably rises once again.
The trends are easy to interpret. Property dips, but will always rise.
When the prices do go down, a skilled investor will also see opportunity, and buy as many properties as they can at huge discounts.
So yes, most people would agree that investing is risky.
But is saving hard cash any less risky?
Currencies can become worthless if governments experience a crisis, and with inflation nobody wins as a lifelong saver.
So save money in the short term, educate yourself and increase your financial intelligence.
You can then invest with confidence, and watch your assets grow.
Flipping houses can be extremely complicated and expensive complicated. It can also be the easiest and most profitable way to make life changing money in a relatively short time.
A helpful acronym comes to mind in regards of how to do it right, which is: KISS
The temptation to go overboard and overthink your renovations can be all too much for the beginner when flipping houses. I was exactly the same before my first house flip, and my initial budget for renovations went through the roof. I was undoubtedly very stupid, getting carried away without an initial plan of costs and just how rapidly they could mount up.
Learning how to plan, using resources saved me from spending thousands over the top and leaving me very little in way of profit.
I remember shopping for tiles, and selecting the grandest and best they had in the store, thinking that the key to selling for big profits was to add as much wow factor as possible. Don’t get me wrong, there’s nothing bad about a wee bit of wow when you are buying new fixtures and fittings.
But just make sure it falls into your budget by doing two important things:
1.Look around for the best deals
2.When you find them, negotiate hard!
Try not to buy the fixtures and fittings as soon as you find them, unless they are ridiculously cheap.
Instead, you should write down the price and enter the value into an excel spread sheet along with everything else in your budget. This is so important for making profits flipping houses!
When you get your prices down, and you have them displayed in front of you, the urge to spend like crazy will be gone, I promise. It’s a pretty sobering experience to see all the zeros stacked up for your total spend.
This information however can now be easily tinkered with, and adjusted here and there for the best possible outcome. You may look at your budget for painting costs, and decide that actually, if I go for magnolia, which is cheaper, I could divert some of those savings into stunning tiles in the bathroom. Or you could go for the mid-range kitchen appliances which look top of the range. You can find them with a cleaver piece of shopping, and use the thousands saved to upgrade your work tops to granite, or upgrade the flooring.
If you take the time and carryout a small amount of work to save money and still get the wow look. Then you’ll not only make more money when it comes to selling your property. You will also make it far smoother to find a buyer and sell it fast.
In this post I will be giving away a Free Budget Excel document, which I used to budget for my renovations. It will include exactly what I spent throughout the project, and will include box’s next to my budgets numbers, where you can enter your own prices for comparison. I Hope you find this Free budgeting tool useful.
Good luck and Happy Investing!
Flipping Homes 101 - Sell It Like A Boss!
Flipping homes 101 - Sell it like a Boss!
After all of your hard work creating and designing your investment property, it almost seems like your troubles are over when you get the place ready for market.
At this point in flipping homes, you must realize that you are only halfway towards your goal.
Of course there are several options at this point, and all can be lucrative.
· You could sell it for a quick profit
· Rent for the short term, with an intention to sell within a few years
· Rent it out, and pay off the loan using the rental income
· Rent the property, and use the rising value to leverage and purchase other
property, while generating a monthly rental income
There is no right or wrong answer to property investment. Making the correct decision about which direction to go, comes down to market conditions, supply and demand, and the type of house flip.
Personally I am currently inclined to go with the last option, and rent out the property to enjoy the low interest rates available on the mortgage market. Because of the low interest rates, property prices are rising, and the low monthly repayments mean a decent rental return.
But a friend of mine, who is also investing, has taken a different strategy. He’s flipping houses as fast as he can, believing that rolling the profits is the surest way to go. He may be correct.
Either way we both have money invested that is growing, albeit at different speeds – unlike a savings account I must say!
But I am in it for the long haul, hoping that prices will rise and yield me a capital gain, while taking a monthly income from renting them.
But if you do decide to sell your investment when flipping homes, you must consider these obvious questions.
How do I sell it for the best possible price, and how do I make the sale fast?
The answer is the same for both questions actually.
· Get a good local real estate agent!
I know it sounds like common sense, but some people I know have just gone with the cheapest agent, thinking they will save money when they sell their property. But this could be a false economy.
Sometimes though, you can get lucky and the house sells in the first hour, no matter who you sell with.
But don’t leave it to chance and get in a pro.
Remember, they’re working for you, so get as many round as you can and let them sell you for their services. It’s like a job vacancy you are trying to fill, so they must face a kind of job interview. Ask them questions but remain friendly and enthusiastic. After all, you want them to like you if you give them the job. If they like you, they will sell harder for you.
The questions you should ask them are as followed:
· What is their local knowledge?
· How much could the property sell for?
· How many similar properties have they sold just like it?
· How many have they sold recently?
· How fast is your property likely to sell?
· What are the rental opportunities, conditions and prices like?
· Ask advice about your property- Is the finish good enough?
· General chit chat, about their company – How many employees they have?
· Who will be working with the property, and how many of them will be on it?
· Who will be your main point of contact?
The list is not a script, so think of as many other questions as you can and see how they answer. Then go with your gut on who you decide to go with.
Your decision should be based on whether they can sell to you their enthusiasm. If they can’t sell to you, how can they possibly sell your property?
Once you’ve made your decision, get your quotes in. I’ve heard of quotes as low as 0.5%, but the usual I have experienced is between 1.5% and 3.0%. This is the time when you need to get your negotiating hat on, and very kindly explain to your best choice, that other agents have come out cheaper, but you were impressed with them the most.
Tell them how you would love it to be them who takes your house flip to market, and most importantly let them know that you plan to sell more property with them if things go well.
Normally they should lower their rate, but don’t squeeze too hard. You want them to make money, because if they are making money, that means they have done their job. But there is no reasons to say that you should not both get a good deal.
If it does go well, I would recommend you stay with them every time you flip a house in the area. The more you sell with them, the greater loyalty you will garner.
You will quickly see your rate come down after every sale.
Good luck and happy investing!
Flipping homes 101 - What to do on when you get the keys!
Once finance has been arranged to purchase your house flip; and you find yourself inside a wreck of a home you plan to transform, remember one thing –
When you first looked around the place with an investors eye. You may have been excited about all the changes you could make to the property when you eventually acquire it. But now you own the monstrosity of a home, and you’re standing inside of it for the first time as the owner, the reality of the situation will suddenly comes crashing down on you like a tidal wave. In my case it was more like a tsunami, but with experience you learn how to turn those fears into excitement once again.
On my first time flipping a home, I was so nervous, thinking about all of the things that could go wrong. There was so much construction and planning to carry out that for the first few weeks, I hardly slept a wink.
But once you're involved on a day to day basis and you’re smashing your goals, you forget all about that first day when you walked though the properties front door.
It’s very similar to climbing mountains or starting at the bottom of a very tall ladder. You look up and see the top. But the climb is so high, so dangerous with unknown perils all the way up.
The first step is always the hardest and the most stressful, yet once you begin the climb, all of the pressures melt away into the present. You even forget to look up or down anymore because you are so engrossed in the now, you then start to enjoy yourself.
The climb is now exciting.
That’s what I told myself when I walked into the horrors of my second house flip. The musty smell and hoarded collection of junk and dirt told me the summit of my new mountain would be hard to reach.
But reach it I would.
Fundamentally the shirt sleeves need to be rolled up straight away, and you need to attack the house from day one.
This means you need to be prepared before you even step into the place.
Success in Flipping homes comes down to planning.
Before I actually begin renovations, I've priced up everything. Including new kitchens, new bathroom suites, carpets or other flooring, estimates from contractors and most importantly the contractors availability.
You need them to be in the house and working asap, so I let them know the day I’ll get the keys to ensure they have it booked into their diaries.
The more homes you flip, the better you will become at planning the renovations.
But always have a plan, and then get to it.
The first thing you should think about doing on day one is clearing the place. A blank canvas is the best thing to work with, so remove crummy wallpaper, flooring and get the house back to bare walls and floors.
After you have done this, look at what services have to be updated or installed. Electrical, plumbing and insulation should be planned in once the house is clear. It not only gives the contractor room to work, but also saves any damage to any new fixtures and fittings.
Once the services, including drainage have been taken care of. Get the house plastered where needed. Try not to scrimp with this. Buyers like smooth clean lines, so if a wall is 50/50, get it done!
While the plasterers are at work and while it dries, use the time to tidy up the exterior and curb appeal of the home. Make the garden presentable and perhaps update or rejuvenate the widows, cladding and roof.
Then when the plaster is dry, paint the walls, ceiling, doors and frames before the new flooring goes down. After all, you don’t want to get paint on the lush cream carpet.
When the flooring and other work is done, it’s time to clean. Consider your property as a product.
You wouldn’t put a product on the market unless it was in tip top condition. Flipping homes is no different. Only when it’s ready, revalue the home and then sell using local agents only.
In the next post I will explain why you should use local agents. But for now, happy investing and good luck to you all.
Flipping homes 101 – Holding your asset!
When flipping homes there is an enormous urge to cash in as quickly as possible. The work has no doubt been hard, and the agent has hopefully given you some good news that your homes value has gone up dramatically.
So is now the time to sell?
Well that depends on many factors including:
• Market prices
• Your need for instant profit or cash flow
• The type of property
If house prices are booming, then it would make sense to cash in as soon as you’re finished, and roll the profits on to the next house flip.
But I believe that house prices will continue to rise. Looking at the trends over the years indicate towards this belief.
In other posts, I have pressed the need to flipping your asset as fast as you possibly can. The reasons for such haste are simple: Mortgage payments and bills.
But if you are considering a different strategy, for a longer term period of owning your asset for high profit gain.Then this is how to do it.
The chances are that in ten years time your property price would have risen considerably. On average it’s around 10 to 15% of an increase, every year in some areas.
I’ll let you do the maths on your assets and you will see that owning property is a fantastic investment.
But what about those mortgage payments and accumulating bills? I hear you cry.
Well if you decide to go for the long game and high back end capital gains, then renting your home instead of selling it after the flip, could make you a monthly passive income on top of the final inflated profits many years later.
Let your tenant pay your mortgage, expenses and even pocket a well earned profit until you think the house prices are at levels great enough for you to be happy to cash in.
However, there are no right or wrong answers when it comes to flipping homes. You may be flipping a home in an area where the rental market is in low demand. You may need to get your hands on the cash to fund another flip.
It is possible to pull money from a property without selling it.
Once you've finished the flip, have the bank revalue your property. If you have purchased well, then your asset should have gone up in price. You can then ask to borrow additional funds against this increased value as a deposit for the next property to flip.
You can do this every time your asset rises in value as long as the mortgage product allows for the facility of extra borrowing. Fortunately most lenders do include this feature into their deals.
Essentially the banks will be financing your future purchases. Pretty good if you ask me!
Flipping homes 101 - Using mortgages to fund the flip
Flipping homes 101 – Mortgages
The whole idea and point of flipping homes is to turn a wreck of a building into a habitat of worth as quickly as possible.
Unless you pay for it with your own cash, you will need a mortgage to finance the venture. The need for a mortgage is why there is such a great need for haste to complete, before the rolling monthly payments swallow your profits.
You will also have to take into account that utility bills will keep coming. This is why a detailed plan must be formulated before you have even purchased the property. In other articles I have mentioned the need to cost your project out to stop any nasty surprises along the way. No greater element should be looked into than mortgage deals and arrangements. A wrong move here could really eat into your profits.
Mortgages for flipping homes can be tricky. Normally the banks like to lock the customer in for a fixed term of around two years before you can pay back the loan. The trouble with that is, your flip should not take you any longer than six months. Of course there are lenders out there that provide bespoke arrangements for flipping homes. But the interest rates for such luxuries can be considerably higher than most normal off the shelf mortgages.
There is a way around this though, especially if you are in it for the long haul. To avoid paying extortionate early redemption penalties for paying off the mortgage before the end of the fixed term, check one aspect of the mortgage product before you take it out with the bank. Make sure the mortgage product is transferable to another home.
Most mortgages will allow you to move the loan from property to property, without paying an early redemption penalty. Once you have finished your renovations, perhaps even halfway through, start looking for the next property to purchase and renovate. That way you will not only save money by not paying an early redemption fee. But you will also save by not needing to apply or take out another mortgage product.
By making sure the mortgage is portable you can just move the loan from purchase to purchase until the fixed term agreement is over. Then you have the option to get out and pay up the loan after selling your latest house flip, or keep the ball spinning for another property.
Currently there are mortgage deals for a two year fixed rate for just over 1% with an average of 2-3% depending on how big your deposit is or your circumstances.
It is true that house prices are high at the moment, and many of my friends who invest in flipping homes are considering consolidating due to the high prices.
But the awesome rates available for a mortgages, make buying property so much easier on your pockets, and I do not believe we will ever see the cheap deals again. Well, not for a long, long time anyway.
Assuming houses will stop rising is also a bad gamble. I believe the market may have a blip or two. But like a juggernaut it will keep climbing. Populations are only getting ever bigger, and people all need a home to live in. So supply on demand will make your investment pay big time in the long run.
The question is not - can I afford to buy a house in todays inflated market?
The question should be - can I afford not to get started right now. Because cash, as you may have already seen in my other posts. Will just dwindle in value over time. That is why I am putting my money into flipping homes and renting out homes.
On the next post I will look into holding on to the property after renovations are finished, and explore the option to rent the home and gain an income, while watching your asset value rise year on year.
Flipping homes 101 - How to get started!
Flipping homes 101- How to get started
Every towering oak tree once began as a humble sapling. But before it even becomes a sapling, it is first a seed, which fights to break through the earth and find the light and it’s place in the world.
Just like a sapling, every property investors must start from the beginning. How high you climb depends on many factors. But to just break the surface and begin your growth, you must have one important element.
•\tAn initial stake or (Deposit)
The financial climate is constantly in turmoil, with living costs becoming higher and higher. For most people, trying to claw together any kind of summer for investing can prove near impossible.
If you are young, then you have the benefit of time to fund a business flipping homes. It is not for everyone though, but if you enjoy tracking property prices and take pleasure from making something beautiful from nothing. Then maybe flipping homes is the best and safest investment for an early retirement.
Don’t get me wrong, the work is hard. The reward however, for your patience could change your life, as it did mine.
Saving money over a lifetime can only make you poorer. I say that because the value of hard cash goes down year after year.
For example, have you ever said to someone that this or that was worth half of what we paid ten years ago.
Petrol, food, heating and insurance are all rising. But if you save for a final nest egg, then the money you put away ten years ago will be worth half of what it was because prices rise. This is inflation.
But smart investors put their savings into assets. But assets can be risky, you may be thinking. Well in most cases that is true. I had some stocks that have done terribly. Gold and many other traditional investments are like gambling. You place the ball on red or black and hope for a good spin.
Unless you are an expert in stocks and shares, I would be cautious when investing into something so volatile.
Property however has proved a very safe and steady investment.
There is a saying where I live. (As safe as houses)
Where the value of cash dwindles, property will rise and rise. We have had our setbacks with various property market crashes. But like the coming tide the high prices return and continue to climb.
Flipping houses is an even safer bet, as long as you do your homework first. It’s still investing in property, but instead of waiting for your asset to grow, just like the mighty oak tree. You are making quicker gains buy transforming a wreck into something of desire and worth.
Whenever you worry about investing in property, remember this. Populations are rising and less and less land is becoming available. This can only indicate to me that property will keep rising with demand. That is after all why prices go up. Demand.
So if you have always wanted to invest in property, find out how to do it first. Then save your initial investment money if you do not have it (normally 10% of the home value) and then make your money grow with the rising market.
For a brief step by step guide and recommendations of great books on flipping homes follow the link below:
Driving a car is risky until we have our licence. So educate yourself on how it’s done.
My next post will be about using Mortgages to leverage more profit.
Profits for flipping homes are made When purchasing!
I know many people in the business who think that buying the property at any cost is what it takes to be good at flipping homes.
It is true that property is a great investment and could lead to life changing profits. But to insure that you make it big time. You must first learn the art of negotiation!
The competition you will be going up against for your purchase will be thin. They will however be the same kind of buyer as you. They will want to make as much profit as possible as you too, so the one with the best negotiation skills will walk away with the house.
I have beaten opponents for a house, who have much deeper pockets than me, and could have afforded a larger offer. Just like in the Godfather; you must make them an offer they can't refuse.
I don't mean you must put a horses head on their bed while they sleep to get the deal done. But you must make what your offering seem like a sound and safe deal. If you are buying with a mortgage, have it in place so you can say to your seller that you are a cash buyer and your ready to go.
When being shown around the property for a viewing, make sure you are lavishing the seller with complements. Even if the place is a dump, be sure not to outline all the wonderful changes you plan for their home. They may have loved the place they have lived in, and the thought of you meddling with it is bad enough, let alone you rubbing their noses in it.
Be charming and remember that buying the place as cheaply as possible is the single most important thing when it comes to flipping homes.