THIRTY-SOMETHINGS SCOTT AND ANGIE Patterson pooled their paint contracting and business development experience to become full-time property investors in 2002. Their co-owned firm, Greenlight Development Inc., has now flipped around $15 million in real estate near their Charlotte, N.C., home base.
Though the Pattersons find most of their homes "close to town in Charlotte," their checklist for finding the perfect flip applies anywhere:
1. Look for homes below $200,000, where Scott says there aren't that many developers shopping for flips. "The upper-end home market," he says, "is already saturated."
2. Look for older, urban areas that are slowly being revitalized and are within a few miles from downtowns -- "areas that at once upon a time were beautiful but have deteriorated and now people are wanting to live there again," Angie says. "There's a movement for people wanting to move back to the city, and pay a nice price even for smaller houses."
3. Look for homes that can easily be gutted and reconfigured. "Gutting, it turns out, is almost as easy and worthwhile as trying to part and keep things," Angie says. "Just trying to do cosmetic fix-ups can sometimes be more trouble than it's worth." What to add in? "The things that everybody loves now are open spaces, nice bathrooms, nice kitchens, hardwood floors, upscale fixtures and granite countertops (even if something else is more practical)," Angie says. "People aren't always looking for square footage as much as they are for luxuries. Always put a deck on to give more living space outdoors; add a nice master bedroom and adjoining bath. The trick is getting the numbers to work."
4. The house has to be below 80 percent of market, though generally "we like 70 percent," Scott says. "We'll do 80 percent if we're able to add enough value, like with a large addition, to make that 30 percent profit" after paying the contractors.
"We buy a typical house for around $90,000, put in $80,000 or $90,000 and sell for $250,000," Scott says. "That's the meat of our market, our prototype. We'll also buy for $150,000 and put $150,000 into it and sell it for $400,000, but there's really already a saturated market in that price range."
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Would you add anything to this list?
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| Jennifer D. Meacham, Gather Money Correspondent | ||||
Jennifer's column, "The Bottom Line," is published every week to the Gather Essentials: Money channel. Jennifer is a business and personal finance columnist who covers money matters for RedwoodAge.com and real estate news for RISMedia, and co-authored the best-selling retirement investing guide "IRA Wealth: Revolutionary IRA Strategies for Real Estate Investment" (Square One Publishers, New York). Keep up on the latest news and analysis into how you can take control of your business and personal financial future by joining Jennifer's "Self-Directed Investing 101" network. | ||||
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Comments: 15
We are going to practice on our own house. We inherited it from Bill's mom, unencumbered. So we are going to take out a small mortgage and renovate. If it goes well, who knows, I might be a real estate flipper! ;o)
Excellent point Dana H. Plus, you'll have a lot less committed if something does go wrong. I think the below-$200,000 market is the ideal entry point -- if not staying point -- for today's prudent investor.
Our rule on flips or rental property is that we don't buy houses or apartment that we wouldn't live in. It doesn't have to be in as expensive a neighborhood as our personal home, but it has to be in a decent, honest family-friendly neighborhood.