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Albert E. Real Etate Blog

Why Austin? This is why...

By Albert Elhage | Broker in Austin, TX

Flipping Homes in Austin

Statesman.com
 

Ask an Agent: Is flipping a home worth it in Austin?

Feb. 11, 2012

Five years ago, TV shows made flipping houses seem like fun. Those shows are still on and, from time to time, show up in Austin. Can flipping houses still work in our current economy? If I'm interested in flipping a house, what should I look for in a property?

Kinan Beck, One Source Realty: If you watch the shows closely, you will see the ups and downs of flipping houses. It is not always as easy as it might seem, and it is important to bear in mind these are TV shows, so sensationalism is important when trying to entertain people. Not every flip will be a huge success.

In our current market, there are definitely some deals to be taken advantage of if you have the right resources: priced-right contractors, electricians, plumbers, etc. When you are a lone person doing one property here and there, you will not have the same advantage of a person or company that does numerous flips each year. Just like anything else, the more quantity you deal with, the better deal you will get from your vendors.

When looking at property for a possible flip, the most important thing is to make sure the house structurally is sound. Some of your most expensive repairs will be foundations, roofing, electrical and plumbing. These are especially true in older homes, in which it might be necessary to rewire or re-plumb the entire home to meet building codes. Other things to look for are asbestos, lead paint and mold.

If you are planning to get a loan to purchase the property, the home must be in sellable condition, with appliances intact and also no serious cosmetic work needed, so these are things to consider as well.

If you are considering trying the flip-side of real estate, I recommend you have a thorough inspection of the property, have an experienced agent to negotiate on your behalf, budget for the unexpected (there is almost always an unexpected) and be prepared for the stress of staying on budget and within your planned time frame.

The longer you hold onto the property fixing it up, the more money you throw out the window. Before you choose to jump into the flip market, talk to a few real estate professionals and do your homework on any property you are considering.

Byron "Buddy" Schilling, President of J.B. Goodwin Realtors:

TV programs about flipping houses warn that it is not easy — but still they make it look like fun and profit. Those programs do not give a complete picture of the financial risks. It is a lot more entertaining to see someone make a lot of money than to see someone losing their shirt.

Flipping homes in Austin is particularly hard because our prices have gone up very little over the years. In 2010 the median price was up 2 percent and in 2011 it remained level. That means you have to buy something below market and make sure you do not spend too much remodeling it to be able to sell it at a profit.

The old rule in remodeling is it will always cost 20 percent to 30 percent more than you originally expected. Once the project begins, you find other things that need to be replaced. The profit margin in flipping is dangerously thin if the prices of homes are not shooting up around you.

If flipping homes were easy in Austin more real estate agents would do it.

Brian Talley, Regent Property Group: Flipping houses can work in any market and can be very profitable if the numbers work. Because there is a lot of money in Austin, looking for good investment opportunities, good deals can be hard to find.

Getting a good deal often requires good timing for a buyer where a seller is willing to take a below market price to sell quickly. Sometimes buyers can find good deals with homes that need updating where the seller is willing to take less than market so they don't have to deal with the hassle of updating the home.

There are many other scenarios where a buyer can purchase a home and flip it for profit. Nonetheless, it is rarely easy to flip a property for profit and I wouldn't recommend it for someone that doesn't have a solid grasp of home values and an understanding of the associated risks.

If you still want to flip houses, be sure to do your homework up front to get an idea of your best- and worst-case outcome before making the initial investment in a home. If the worst-case scenario is unacceptable for your finances then I'd pass on the opportunity.

Allison Olson, Diane Dopson Properties:Though flipping a home might appear to be a nice, quick way to make some fast cash, you must be realistic if you are thinking about flipping a home for a profit these days.

Here are the main things to consider: Talk with a professional, experienced real estate agent who has worked with flippers before diving into this. One hundred percent traditional financing is no longer an option. And, City of Austin permitting can take a long time. You will need to set a realistic budget and then add in additional allowances for unexpected carrying costs. Distressed properties like foreclosures are few and far between in Austin.

Location is key, as always. So, you'll want to buy in an area without a lot of current inventory. The main thing to know is that it can be profitable. You just need to do your homework first and seek professional advice before stepping into a potentially costly situation.

If you have a question to ask a real estate professional, send it to 
nvillalpando@statesman.com.
 
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