Here is a story on Pierce, a former Marine who has invested in rental properties and managed a construction firm, started buying properties in the Washington, D.C., area in October 2008.
Due to market conditions at the time, Pierce was able to buy homes for as little as $90,000. He fixed up his first house and sold it four months later for $185,000. In 2010, he bought several more homes and sold them for $220,000 to $240,000, usually within six months. Since the recovery of the housing market, prices for distressed properties have risen- between July 2011 and the spring of 2012, Pierce estimates that prices for fixer-uppers increased by 20% to 25%, while sale prices for remodeled homes in move-in condition remained stagnant.
Over the past year, Pierce has completed ten fix and flip projects, with the average net profit ranging from $15,000 to $30,000 per home. Pierce works with investors who fund the majority of his upfront costs, and profits of these projects are split between both parties. Pierce expects a higher return on his current projects because prices for remodeled homes in the D.C. area have been moving higher in recent months.
Pierce’s success story is not due to sheer luck. He has a real estate background, with a real estate license which helps him estimate not only how much a buyer will pay for a property but also the value an appraiser will put on it. He spends a lot of time conducting due diligence on properties to know what the after repair value is (ARV), and estimate costs for these projects.
Bottom line is, fixing and flipping homes can be a good source of additional income. However, if you want to be successful in flipping homes, be sure to conduct extensive due diligence on the property and have accurate cost estimates before committing to any project.
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