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Investing In Distressed Real Estate Essay

2060 words - 8 pages

A fast growing trend in today’s rocky real estate market; buy a house, flip it and sell it quickly to earn a lucrative profit. In today’s real-estate market you have to be smart about the purchase you make and do your homework. Choosing the right neighborhood, a home with good bones, a large lot, and quiet street are key factors in producing a profitable investment. Choosing a home in sketchy transitional areas and over improving for the type of market can leave a real estate investor with a property that stays on the market, causing the investor to loose profit and have to lower his asking price below market value. Flipping properties is a risky business that can pay off handsomely or leave the developer in financial distress.
If I were given 150,000 dollars to invest in a distressed real estate purchase, I would start by securing a knowledgeable realtor on investment properties. Next, I would look for a single family home, with an open floor plan, three bedrooms, two baths, in a desirable neighborhood and priced at least twenty percent below market value to get the best deal. In order in get a larger lot and more square footage at a nominal price, I would look at foreclosures and short sale homes with good bones. Once I found a home in a nice neighborhood near a great school district and large yard, I would place an offer contingent upon a satisfactory home inspection and three percent closing cost assistance. Securing a property before any other buyers knew it was on the market would be a top priority in order to avoid a bidding war and paying more money than necessary.
Once I purchased a suitable property, I will start planning my flip by making a timeline and setting a budget. In the budget, I will include carrying costs, costs of interest, permits, property taxes, maintenance, utilities and materials, landscaping, unforeseen expenses, staging and realtor fees. Timing the sale of my home correctly is very important. In order to prevent my house from sitting on the market, I will work backward from dream open house date to make sure I am on track with the marketing and promotion schedule. Prior to the demolition stage I will obtain permits, order materials and pick colors. My budget for the house is $79,000. My budget for the renovations, permits, and staging is $50,000 leaving $21,000 as a reserve for unexpected expenses.
The home I chose to remodel is a 1957 ranch style, single family detached home with 1093 square feet on a ¼ acre lot. It’s the perfect starter home and has three bedrooms, two baths, and family room with hardwood floors throughout and tile in the kitchen and bathrooms. The house boasts a separate dining room, patio, one car carport, storage room, and central air and heat. The home’s structure is concrete block, with a shingle roof, fenced back yard and located in a suburban area. I purchased the home for $56,000 with 3% closing cost assistance for a net of $53,000 leaving $97,000 for renovations, the reserve,...

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