When you get started in flipping homes or making rehab purchases, you will find that one roadblock will be determining how much to offer for the home. You will have to determine how much you can offer at a maximum while still having the potential for a profit once you rehabilitate the home. You will also have to determine how much you can afford for the offer. All of this together can make things quite difficult, especially if you are new to the game. If you are not careful, you could over extend yourself and you will not be able to make a profit. Alternatively, if you come in with too high of an offer, you could get shut out and you may lose the property to someone else. It would be nice if you had some way of determining how to make that offer. A formula would be great, wouldn’t it? The good news is that there is one! Right here, you will find everything you need to always make the best offer on the property you would like to flip. When Do You Make Your Profit? The first thing to remember is when you actually make the profit on a property. Many first time investors mistakenly assume that the profit comes in when they actually sell the property. While that may be when you actually get the cash, this is not when you make your profit. You do not make the profit during the house flip either. Instead, the profit comes in when you first make that offer on the home. If you do not make the right offer, you will lose that profit from the very beginning. Understanding Maximum Allowable Offer The formula that you will need to use every time you purchase rehab property will be to understand maximum allowable offer. Often referred to as MAO, this offer should be the most you will be willing to pay for a property. If the sellers will not accept this, then you will know that your potential for profit is just not there. If you calculate the maximum allowable offer and then stay with it, you can make the best profit on your rehab properties. Three Steps to Calculating Your Maximum Allowable Offer In order to determine what the MAO is on the property you are considering, all you need to do is follow a simple three-step formula. If you do this every time you make a purchase, you will have a much better chance at succeeding with your flips. Step One:Determine the value of the property after it is repaired. Hopefully, the home will be worth a great deal of money more once all the repairs are made. You can get a good idea of how much you will be able to sell the home for based on what other homes in the neighborhood are selling. Often referred to as “after repaired value,” this number will be important to the formula. Step Two:Determine your repair budget. This estimation can be a bit confusing if you are new to flipping homes. Do not be afraid to get advice, but you will need a good estimate of how much you will spend on your repairs to the home. Step Three: Use the formula. Once you have the two numbers above, you will just need to use this formula. The ARV (after repair value) – cost of repairs x .70 = MAO. If you use this three-step process, you will have an easy way to determine the most you are willing to offer on a house flip and still make a profit. This is especially useful for beginning investors, but it can be a formula you will find yourself using again and again. ...read more

Real estate investments and home flipping is all about the profit, right? You may be thinking that once you start flipping, you will want to cut as many corners as possible to save money and make big profits. However, if you take the time to watch other, seasoned flippers, you will find out something very quickly. Cheap rehab repairs never equal big profits. In fact, if you pay attention, you will notice that cheap has often led to flippers losing money. There are reasons for this, and in the end, you will see how cutting too many corners can cost you big. You Get What Your Pay For Have you ever heard the phrase “you get what you pay for?” It is often used in reference to restaurants, clothing and technology. However, it can refer to real estate and real estate repairs as well. If you choose that faucet that seems really cheap, chances are, there are reasons it is so cheap. Often, choosing fixtures, building materials and options for the home that are simply cheap will come back to haunt you in a hurry. This is also true of the contractors you hire to do the work. Just because one contractor charges an inordinately low amount does not mean you should choose them. Often, contractors that seem too cheap could be cutting many corners, which would be downright disastrous to your finished product. Potential Buyers Will Notice Your next thought may be to choose better contractors but then use cheap materials and or cut back on upgrades and try to pass them off as high quality because it looks new. There is a big problem to this. At first glance, these cheap materials may look ok. However, potential homebuyers will not just glance. They are making a big investment, so they will look, and they will do so with a critical eye. If you choose Formica countertops when you should be using granite, buyers will notice. Unlike choosing a low cost light fixture, the buyers will be wowed by the granite sizzle features and not think twice about the lighting used. This approach will get it sold at the top of your market pricing. Quality without the Hassle Just how, then, can you make a big profit off a house flip if you have to spend more money on contractors and materials? There is a simple answer. You just need to be reasonable. If you look for contractors that offer fair prices, chances are, you will get much better quality of work done, and also get the flip done faster. Most potential buyers will not see the added value in that designer bathroom sink. They will notice ceramic tile over the sink! This value is huge; the cost difference is even bigger! Another way you can make the most profit will be to understand the whole scope of the project and stick to your timeline. This is a house flip, not a refurbishment of your own home. You will need to keep the whole scope of the project in mind, and do not get bogged down in bickering over which paint color to use and what backsplash to pick. All you will do will be losing money. Instead, make decisions quickly and let the contractors do their work. Do cheap rehab repairs equal big profits? No, they do not. In fact, they could actually cost you your profit in the long run. You need to make sure you see the difference between being cheap and being budget conscious so that you can have a successful and profitable flip that will work out for you and the homebuyers in the end. ...read more

Ask any home flipper and they will tell you one thing. It can be stressful! You will have to find contractors if you do not plan to do the work yourself. You will also have to make all the decisions as to what items will be used such as faucets, paint, and floor coverings. However, none of these decisions will be as stressful as choosing the right financing method if you do not already have a choice made.Of course, your first thought may be to finance your flip through the bank. However, there are many situations in which financing through the bank will not be the best choice. Bank financing will require you to provide credit info and work history, along with many other contingencies. Most times, traditional bank financing will not be the best financing for a quick sale. There are other ways you can creatively finance your flip, and some of them are much easier. Here are three ways you can finance your flip without the hassle of dealing with the bank. Home Equity Line of Credit / Unsecured Cards If you already own a home and you have equity in it, you can actually open a line of credit and then make use of this equity to finance your flip. A home equity line of credit is much easier than having to go through the hassle of getting a bank loan or mortgage. Often, you can open these lines of credit with just a telephone call and a couple of signatures. Usually, you can get them through the same lender that holds your mortgage. This makes things much simpler overall and you can easily get enough funding to finance your flip provided you have the equity available. Another option would be to tap into low interest credit cards; these are unsecured and offer another creative financing method, pool together three or four cards and you could have $50-$100,000 instantly! Hard Money Lenders Hard money loans are often referred to as rehab loans because they are used predominately for real estate investments and home investing. This is because the loans are designed to make it easy for you to finance the cost of the home, along with enough money to pay for the renovations. Here is how a hard money lender will work the loan. These loans are solely for investment properties. For the most part, if you are using a hard money loan to purchase your flip, you will be able to finance up to 65% of “as is” value of the acquisition, along with 100% of the renovation costs. This way, you will be able to borrow enough money to buy the home and then have enough cash to actually do all the repairs. IRAs All IRAs are not created equal! In order to use your funds tax deferred, you will need to open a Self Directed IRA. This will allow you to (just as the term says) direct your funds to the investment of your choice that is allowed under IRS guidelines, real estate being one of them. So, you will be able to borrow against your retirement and use the money for a home flip. You will need to pay the funds back to the IRA within a certain amount of time that you determine, but this is a good way to free up cash for your flip and also build up your retirement tax deferred. Should you not have loads of cash at your disposal, use one of the above financing options to get your deal done quickly and grow your business. Joe Abbascia is an expert property investor providing vital knowledge on how to buy properties wholesale, about flipping homes successfully and more.  Want to learn how to flip properties visitPropertiesCentralWholesaleDeals.com Want to sell your home quickly and for cash visitPropertiesCentralHomeBuyers.com ...read more