You make your money when you buy.
What does that even mean?
It means that the price you pay for the house is the best indicator of your future return on investment.
Many house flippers have learned this lesson the hard way. What looks easy on HGTV can be very difficult in real life.
Regardless of how good your remodel is or how tasteful your decorations are, if you didn’t buy the house right, you could end up making very little money, or even worse, you could lose a lot of money!
An example:
- Mr. Flipper buys a house on the market using a real estate agent who tells them they are getting a good price.
- Mr. Flipper begins the remodel and after he takes up the floors, he sees issues with the foundation that will require extra money.
- Mr. Flipper tried to save some money by doing some of the project DIY and spends nights/weekends painting, laying tile, and installing cabinets.
- Some months later, after much work and much money spent, Mr. Flipper sells the home with the real estate agent for a loss.
This happens all the time.
Is it usually because Mr. Flipper wasn’t good at remodeling? No.
Is it because Mr. Flipper went a little over budget? No.
Why did it turn out this way?
Mr. Flipper paid too much for the house.
Here’s what’s awesome, though!
If Mr. Flipper bought the house right, it could easily forgive budget overages or bad decorating taste.
In fact, if Mr. Flipper bought the house right, he could likely turn around and sell it as-is, with no remodeling at all, for at least a little profit — what I call a Quick Flip.
This principle applies to all of us, not just Mr. Flipper.
If you're hoping to sell your next house for a profit a few years after owning it, you must make sure that you buy it right!
And, usually, the best way to buy a home right is direct from the owner, off the market. More on this in a future post.
