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Ralph R. Roberts. Flipping Houses For Dummies
Flipping Houses For Dummies® To view this book's Cheat Sheet, simply go to www.dummies.com and search for “Flipping Houses For Dummies Cheat Sheet” in the Search box. Table of Contents
List of Tables
List of Illustrations
Guide
Pages
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Beyond the Book
Where to Go from Here
Getting Started with House Flipping
Brushing Up on the Basics
Grasping the Concept of Flipping
Spotting distressed properties
Doing your homework
Making a few minor (or major) alterations
Reselling your rehabbed property
Flipping Legally and Ethically
Flipping illegally
Flipping legally: Buy, fix, sell
Determining Whether You Have What It Takes to Flip
Devising a Reliable Flipping Strategy
Building an All-Star Team
Finding and Buying a Flippable House
Rehabbing Your Fixer-Upper
Planning repairs and renovations
Applying makeup
Making a good first impression
Focusing on kitchens and bathrooms
Making moderate changes
Tackling structural enhancements
Profiting from Your Venture
Devising an Effective Flipping Strategy
Deciding on the Role You Want to Play
Surveying Different Strategies
Buy into a hot market
Buy low, do nothing, sell quick
Buy low, apply makeup, sell quick
Buy low, renovate, sell high
Buy low, move in, renovate, sell high
Buy, hold, lease
Invest in new construction
Focus on a niche market
Flip contracts (or do it all on paper)
Cook up your own strategy
Drawing Up a Detailed Plan in Advance
Plan B: Surviving a Flip That Flops
Building Your Dream Team
Teaming Up with a Quality Real Estate Agent
Recognizing the value of an agent
REAL ESTATE AGENT OR REALTOR: WHAT’S THE DIFFERENCE?
Picking an agent with the right stuff
Recruiting Moneymen (and Women)
Finding financiers
Hiring an accountant
Obtaining sound investment advice
Covering Your Back with Title and Homeowner’s Insurance
Locating an Experienced Appraiser
Adding a Real Estate Lawyer to the Roster
Lining Up a Home Inspector
Calling In Your Rehab Team
Securing the Funds to Fuel Your Flips
Recognizing the Importance of Being a Cash Buyer
Tapping Your Own Resources for Cash
Shaking your piggy bank
Unleashing the equity of your current home
Recognizing the risks
Refinancing your mortgage
Taking out a home equity loan or line of credit
Cracking open your retirement nest egg
Leveraging the Power of Other People’s Money
Persuading a bank to finance your flips
Passing the hat among friends and family
GRANNY AND ME
Borrowing from a private (hard money) lender
Making up the difference with a gap loan
Partnering with an investor
Using Conventional Financing (for Longer-Term Real Estate Deals)
Determining what you’re worth in dollars and cents: Net worth
Checking and correcting your credit report
Obtaining a credit report
Inspecting your credit report
Understanding what your credit score means
CREDIT SCORE STATS
Cranking up your credit score
Avoiding mistakes that can sabotage your loan approval
Comparing loans
Finding lenders online and off
Sticking close to home with local institutions
Expanding your search on the Internet
Borrowing for purchase and renovations with a renovation loan
House Hunting with an Eye for Flipping
Scoping Out a Fertile Neighborhood
Pinpointing House Flipping Hot Spots
Tracking migratory patterns
Tagging promising neighborhoods
Finding your focus
Dissecting your city or town
Sticking close to home — or not
Identifying areas in your price range
Sizing Up the Local Real Estate Market
Tracking the appreciation rate
Noting how many homes are currently for sale
Discovering how long houses stay on the market
Comparing Neighborhoods
Spotting the signs of a good neighborhood
Telling when a neighborhood is in decline
Considering Other Neighborhood Factors
HAVING THE NEIGHBORHOOD SCOPE YOU OUT
Grading local schools
Researching school systems online
Picking the brains of teachers and school administrators
Gabbing with parents and students
Digging up crime statistics
Checking crime statistics online
Grilling local law enforcement
Exploring the business climate
Contacting the local chamber of commerce
Talking to business owners
Getting the lowdown on planned neighborhood improvements
Hunting for Houses in Your Target Area
Developing a List of Criteria to Guide Your Search
Focusing Your Search on Affordability
Digging through Property Listings, Ads, and Publications
Searching listings with the help of your real estate agent
Brushing up on the basics
Sniffing out clues on a listing
Weeding out potential time wasters
Scanning the classifieds for keywords
Skimming real estate magazines
Scoping out For Sale By Owner properties (FSBOs)
Mining Special Markets for Dontwanners
Cruising the neighborhood for dontwanners
Tapping into special markets
BAD NEWS IS GOOD NEWS
Advertising to Generate More Leads
Closing In on Foreclosure Properties
Getting Up to Speed on the Foreclosure Process
Brushing Up on Local Rules and Regulations
Procedural stuff
Different types of foreclosures
Taxes
Picking Your Point of Entry into the Foreclosure Process
Pre-foreclosure
FLIPPING WITH INTEGRITY
Finding pre-foreclosure properties
Approaching the homeowners gingerly
Negotiating a short sale
Foreclosure
Perusing foreclosure notices
Taking part in the foreclosure sale
Post-foreclosure
Buying a real estate owned (REO) property
Contacting another investor
Purchasing Foreclosure Properties, Step by Step
Step 1: Find a property
Step 2: Follow the paper trail
Step 3: Inspect the property
Step 4: Bid on a property (when buying at an auction)
Settling on a maximum bid
Testing the waters
Surveying bidding strategies
Performing post-auction chores
Step 5: Survive the redemption period
THE RIVERCREST FIRE: WHY YOU BUY INSURANCE
Scoping Out Properties in Special Markets
Acquiring Properties in Probate
Finding probate properties
Digging up a death certificate for more info
Finding out who can sell the property
Contacting the next of kin
Keeping tabs on overbids
Scooping Up Bargains in Bankruptcy
Brushing up on bankruptcy laws
Selling assets in Chapter 7 bankruptcy
Restructuring debt in Chapter 13 bankruptcy
Cramming down debt in Chapter 11 bankruptcy
Knowing when to purchase
Tracking down houses in bankruptcy
Digging up additional info
Dealing with the gatekeepers
Planning for delays
Finding Government Owned Properties
Buying Properties at Tax Sales
Evaluating Properties and Crunching Numbers
Researching Distressed Properties
Creating a Property Dossier
Checking Out the Property
Doing a drive-by, walk-around inspection
Snapping photos
Following the Paper Trail
Honing your title acquisition and reading skills
BURNED BY HIDDEN DETAILS
Picking details off a foreclosure notice
Digging up details at the Register of Deeds office
Finding the property
Obtaining the property’s title and other key documents
Researching the property’s title
PROTECTING YOURSELF FROM MORTGAGE FRAUD
Gathering information from the mortgage and note
Uncovering facts about additional lender liens
Uncovering unpaid property taxes and other tax liens
Gathering tax information at the assessor’s office
Getting your hands on the property worksheet
Inspecting the Property and Estimating Rehab Costs
Packing for Your Inspection Mission
Finding the Perfect Candidate for a Quick Makeover
Poor-but-promising curb appeal
Cosmetically challenged, inside and out
A second-rate showing
Assessing Potential Curbside Appeal
Taking a Big Whiff, Inside and Out
Inspecting the House for Big-Ticket Items
Focusing on the foundation
Checking out walls and floors
Examining the siding
Giving the roof and gutters the once-over
Glancing at the windows, inside and out
Evaluating the plumbing
Exploring the electrical system
Checking out the furnace and air conditioner
Adjusting your eyes to the lighting
Discovering Some Promising Features
Arriving at a Ballpark Figure for Repair and Renovation Costs
Calculating Your Profit and Best Offer
Doing the Math to Ensure a Profitable Flip
Adjusting for market conditions
Crunching the numbers
Estimating a Realistic Resale Value
Accounting for Expenses
Unpaid property taxes and water bill
Closing costs
Cost of repairs and renovations
Holding costs
Marketing and selling costs
Income tax
The Art of Haggling: Negotiating a Price and Terms
Planting the Seeds of Successful Negotiation
Making an Offer They Can Refuse (But Will Consider)
Calculating a price
Proving you’re earnest: Money talks
Dangling additional enticements
Helping the seller move on
Laying down cash
Protecting your posterior with weasel clauses
Tending to the Details: Inspections, Appraisals, and Walk-Throughs
Inspecting the house from the ground up
Examining areas of concern
Moving forward with the inspection results
Ordering an appraisal
Taking one final walk-through
Closing the Deal
Fixing Up Your Fixer-Upper
Building and Managing Your Rehab Team
Identifying the Expertise You Need
Finding and Recruiting a General Contractor or Subcontractors
Adding a Handyperson and Other General Help to Your Crew
Structuring Financial Agreements
Contracting with Your Contractors
Managing Your Rehab and Your Team
Drawing up a punch list
Assigning projects
Scheduling the work
Managing your team
KEEP YOUR ENTHUSIASM IN CHECK
Prioritizing and Planning Your Renovations
Developing an Eye for Home Improvements
Prioritizing Your Projects
Tackling essential repairs
Gauging renovations to get the most bang for your buck
Adding inexpensive, last-minute touches
Delegating Duties
Identifying do-it-yourself projects
Getting a little help from your friends
Flagging jobs that require professional expertise
Drawing Up a Tentative Budget
Coming Up with a Game Plan
Switching on utilities and ordering materials and a dumpster
Utilities
Materials
Dumpster
Combination key lockbox
Tackling underlying problems first
Working from the top down
Working from the outside in, or vice versa
Allotting sufficient time for your projects
Giving Your Property a Quick Makeover
Sprucing Up the Yard
Freshening the Façade
Touching Up the Interior
Revitalizing the entire interior
Updating the kitchen
Spending quality time in the bathrooms
Modernizing the bedrooms
Making the basement look livable
Attending to the furnace and hot water heater
Perking Up the Curb Appeal
Revitalizing the Landscape
Doing the bare minimum
Revitalizing a tired lawn
Designing an adequate landscape
Prepping areas for planting
Positioning and planting your greenery
Adding the final touch: Fresh mulch
Maintaining the landscape
Tidying Up the Driveway and Walkways
Asphalt driveways
Concrete driveways and walkways
Stone or brick walkways
Making Entryways More Inviting
Refinishing the front door
Refurbishing the front porch
Adding some finishing touches
Refreshing the Outside Shell of the House
Laying a new roof
Repairing or replacing gutters
Retooling the siding
Glamming Up the Garage
Dazzling the Crowds with Updated Kitchens and Baths
Giving a Facelift to Kitchen Cabinets, Countertops, and Sinks
Refinishing or replacing cabinets
Updating hardware: A cosmetic fix
Resurfacing or replacing countertops
Installing a new sink and faucet
THE PROBLEM WITH OLD KITCHENS
Modernizing Kitchen Appliances
Deciding whether to install appliances
Adding or replacing the dishwasher
Roaming the range, oven, and cooktop
Installing a space-saving microwave
Keeping, removing, or replacing the refrigerator
Updating the Bathrooms
Repairing bathroom walls and floors
Refinishing or replacing tubs and showers
Evaluating bathtubs
Surveying shower stalls
Taking a look at the tile
Dealing with la toilette
Replacing the seat and handle
Replacing the toilet
Updating the sink and medicine cabinet
Adding or improving ventilation
Tackling Moderate Makeovers
Installing Replacement Windows
Knowing your window options
TOSSING YOUR MONEY OUT THE REPLACEMENT WINDOW
Trimming the cost of new windows
Replacing Drab, Weathered Doors
Making the quick fix with a new storm door
Replacing an entry door
Repairing or replacing sliding glass doors
Fixing a sliding door that has lost its slide
Replacing patio doors for a whole new look
Installing new interior doors
Putting on Your Own Floor Show
Laying vinyl or linoleum flooring
Refinishing hardwood floors
Updating the hardwood floors
Laying ceramic tile for a touch of class
Reconfiguring Spaces and Other Structural Overhauls
Attending to Essential Structure and Infrastructure Repairs
Fiddling with the Floor Plan — or Not
Identifying Load-Bearing Walls
What is a load-bearing wall?
How are conventional and truss roofs different?
Is this wall load-bearing?
Maximizing the Use of Existing Space
Knocking out walls
Raising the ceiling
Designing a whole new kitchen
Adding a bathroom
Spreading out to an attached garage
Transforming a porch into a room
Creating a room in the attic
Deciding whether to finish a basement
Building New Rooms from Scratch
RENOVATING OUTSIDE THE BOX
Adding a Deck or Patio
Cashing In: Realizing Your Profit
Considering Your Options: Cash or Cash Flow?
Setting a Goal: Cash or Cash Flow
Cashing Out: Selling the Property
The buy-fix-sell approach: Listing the property for sale
SELL IT YOURSELF?
The buy-sell strategy: Selling to another investor
Exploring Cash Flow Possibilities
Refinancing to cash out the equity
Reselling a foreclosure property to the previous owners — or their family
Reselling to the previous owners
EQUITY STRIPPING — DON’T DO IT!
Financing the buyback through insurance policy proceeds and other means
Leasing the property to the previous owners
Offering a lease-option agreement
Assigning your position to a junior lienholder
LEVERAGING YOUR POSITION
Marketing Your Home
Harnessing the Power of a Real Estate Agent to Market and Sell Your House
Knowing why you should hire a seller’s agent
Negotiating with an agent during the selling process
Taking advantage of your agent’s access to the MLS
Setting an Attractive Asking Price
Don’t be greedy
Understand the current market
Know the price you need to make the profit you want
Staging a Successful Showing
Recognizing the value of staging
Making your staging checklist
Offering to Help Secure Attractive Financing
Becoming a Real Estate Marketing Maven
Choosing a method of contact
Planting a For Sale sign on your lawn
Listing your home online
Designing, printing, and distributing flashy flyers
Advertising your home in the classifieds
Hosting an open house to build word-of-mouth buzz
Negotiating the Sale to Maximize Your Profit
Comparing Seemingly Similar Offers
Does the buyer have financing?
How “earnest” is the buyer?
What else is the buyer asking for?
What conditions has the buyer included?
How soon does the buyer want to close?
AVOIDING THE DOMINO EFFECT
Mastering the Art of Counteroffers
Submitting a counteroffer
Coming up with a savvy counteroffer
Putting your counteroffer in writing
Leveraging the power of multiple offers
THINKING LIKE AN AGENT
Shuffling Papers and Other Legal Stuff at Closing
Having the right folks represent you
Prepping for closing
Sealing the deal with paperwork
Trudging through Some Taxing Issues
Estimating the Tax Collector’s Take from Your Flipping Profits
Maximizing Tax Savings from the Sale of Your Principal Residence
Proving “principal residence”
Qualifying for the two-out-of-five-years rule
Taking the ownership test
Splitting hairs: Special circumstances
Slashing Your Capital Gains through Careful Deductions
Deferring Taxes: Rolling Your Gains into Your Next Purchase
Selling Your Home at a Loss (Ouch!)
Paying Income Tax: When Flipping Houses Becomes Your Occupation
The Part of Tens
Ten Ways to Find Dontwanners
Cruising the Neighborhood
Teaming Up with a Qualified Real Estate Agent
Checking Classified Ads and Online Listings
Skimming Foreclosure Notices
Monitoring Tax Sales
Scoping Out Bank-Owned Properties
Probing Probate Properties
Digging Up Houses in Bankruptcy
Sifting through the Government’s Stash
Networking and Advertising for Leads
Ten Signs of a Great House Flipping Opportunity
The Location Is an Obvious Hot Spot
Nobody’s Home
The “For Sale By Owner” Ad Is Shrinking
The Seller Is Highly Motivated to Be Freed from the Burden of Ownership
The House Is Ugly Outside
The House Is Ugly Inside
The Decor Is Outdated
The House Has Character
The House Has Undeveloped Living Space
The Property Backs Up to Nothing
Ten House Flipping Blunders
Falling for a Scam
Speculating on the Housing Market
Waffling on an Obviously Good Deal
Backing Yourself into a Contractual Corner
Failing to Inspect the Property before Closing on It
Assuming That the Title Is Clear
Underestimating the Cost of Repairs and Renovations
Doing Shoddy Work to Save Money
Over-Improving a Property
Forgetting to Pay the Taxes
Index. A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
Y
Z
About the Authors
Dedication
Authors’ Acknowledgments
WILEY END USER LICENSE AGREEMENT
