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I've been looking into updating things like my kitchen and bathroom and read that you only get something between 50% to 90% max back when updating things in your house. So you don't break even. With this being said I don't understand how flipping homes is profitable or adds so much more value. With the extra transaction and holding costs, where does this greater than what you put in return come from compared to doing updates to your own house?
Because people that flip houses for profit treat it as a business.
They buy houses that are significantly undervalued. Often they are starter houses. They typically have a crew of regular contractors they know that can get in and out fast. They sometimes do some of the work themselves. What they do to update is minimal and fast: floors, paint, light fixtures, maybe new cheap appliances and maybe new bath fixtures and vanities. They select the cheapest materials available that are "HGTV appropriate." Because many successful flippers focus on starter homes they can sell faster.
As others have stated flippers don't pay market value for properties. if they did, it would not be profitable.
They also don't do the same finish level upgrades that most homeowners tend to do in their homes. They pick their upgrades specifically for cosmetics and resale, not necessarily quality.
I've been looking into updating things like my kitchen and bathroom and read that you only get something between 50% to 90% max back when updating things in your house. So you don't break even.
True. If you want to update, do it to please yourself and don't think about the money. Then stay put for at least another 5 years and enjoy what you've accomplished.
Quote:
Originally Posted by Berteau
With this being said I don't understand how flipping homes is profitable or adds so much more value. With the extra transaction and holding costs, where does this greater than what you put in return come from compared to doing updates to your own house?
Professional flippers buy houses dirt cheap from desperate people, do cheap cosmetic improvements (often without a building permit), and sell quick.
As others have stated flippers don't pay market value for properties. if they did, it would not be profitable.
They also don't do the same finish level upgrades that most homeowners tend to do in their homes. They pick their upgrades specifically for cosmetics and resale, not necessarily quality.
Could you please explain how flippers bypass the bidding process? In CA for instance, ALL offers must be summitted by realtor to the seller. Not too likely some seller is going to accept a lower offer just because the person is a flipper.
Could you please explain how flippers bypass the bidding process? In CA for instance, ALL offers must be summitted by realtor to the seller. Not too likely some seller is going to accept a lower offer just because the person is a flipper.
They don't necessarily bypass any bidding process. They keep the numbers in mind and aren't emotionally invested in any property. They have the financing ready to go, usually cash, and can offer quick closings. They have a maximum number in mind and will walk away from a property that is above that number. In a seller's market I imagine it's harder to find properties. In a normal, balanced market or a buyer's market it's much easier. One guy I used to work with flipped a few houses a year. He was an agent and always looking for a property he could flip quickly for a profit. Other flippers have a very good relationship with a single agent that is always looking for potential properties. Some flippers follow the foreclosure sales.
Many flippers try to persuade unsavvy people to sell their houses in private sales rather than putting them on the open market, where they could fetch a higher price.
Okay. People are saying that the profit is made buying for below market prices. So then why not just sell it right away without doing upgrades since upgrades only return less of what you pay? Look up any kitchen upgrade and they all say you get less than 100% back than what you put in. So how is this profitable for a flipper?
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