How to Flip a Foreclosed or Abandoned Property
Flipping a property involves buying a house for a discount, fixing it up, and then turning around and selling it quickly for a profit. When you purchase foreclosed or abandoned homes, it decreases the cost to you and increases the amount of profit that you realize as an investor. Before pursuing this investment strategy, it is important to understand how this process works. Otherwise, you may end up investing money in a property that has no real chance of turning a profit.
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Instructions
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Find a property to purchase. Most of the time, abandoned property is very difficult to find, while foreclosures are easier to find. Looking for abandoned property involves searching through a database of government assets. To buy a foreclosure, you attend an auction and bid on it, or work with a bank to buy a property directly. If you are not buying at an auction, make an offer on the bank-owned property and wait for an answer from the bank.
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Take possession of the property and then begin fixing it up. When you fix up a property, focus on items that would seem unattractive to potential buyers. For example, fix the curb appeal of the house by painting the exterior and improving the lawn. Consider upgrading the kitchen and the bathroom, as potential buyers typically look at these areas closely when buying a house. If you cannot do the work yourself, hire a contractor to handle this process.
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List the property for sale. For this part of the process, it typically makes sense to hire a real estate agent. A real estate agent will market the property for you and give your house the most exposure possible. If a buyer is interested in the property, your agent will accept any offers for you and then come to you to discuss the offers. Once you accept an offer, the closing will be scheduled.
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Attend the closing. The buyer will provide the funds for the purchase. You may use some of the funds to pay off the existing mortgage on the property and you can keep the rest as profit.
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Tips & Warnings
When looking for properties, find homes that are priced well below market value. Some lenders will accept low offers for properties so that they can unload them.
Flipping properties is a risky business, even when you are dealing with foreclosures. You need a large amount of cash on hand to make mortgage payments and to handle repairs.
References
- SmartMoney; Buying a Foreclosed Home; Aleksandra Todorova; July 21, 2006
- "Buy It, Fix It, Sell It: Profit!"; Kevin C. Myers; 1997
- MSN; Flipping Houses Is Harder Than It Looks; Pat Curry
- HGTV: Ten Home Improvement Projects That Add Value;
