2 Things You Should Consider Before Buying A Townhouse To Flip It
by Luke Fields
There are many people who have invested in a house primarily for the purpose of flipping it and selling it for profit. In many cases the individual makes a good deal of money on the transaction and can end up having a very positive experience. However, in other cases it can be counted as a loss. Much of the difference is in the preparation of the house and the buying process. Here are some things you need to consider before buying a house to flip it.
Can You Put Enough Down To Avoid Private Mortgage Insurance and Excessive Interest?
The key to flipping a house is making sure that you can put as little as possible into it, while maximizing your profit. One of the ways you can do this is to put more down the house so that you avoid paying things like private mortgage insurance and more interest.
Generally speaking you need to put down 20% on the house so that you don't have to pay additional fees each month. Every month that you pay this insurance is money lost. Thus, put down more on the house. Second, when you put more down you pay less in interest each month. Since loans are frontloaded in interest you will be paying mostly interest at the beginning, and that is not money you are going to get back. So you not only need to sell the house quickly, you need to make sure that you are paying less in interest, which happens when the principle is smaller.
Are The Changes Mostly Cosmetic?
Another important thing to consider is how much work it will take to get the house to sell. For example, you should take a realistic look at the shape of the house. If the foundation has problems, serious plumbing and electrical issues, as well as needing things like new insulation and HVAC, you could be putting in a lot more money that you wanted. Not that you can't flip a house with those problems but you should factor in those costs when you purchase the house.
Instead, if the changes that need to be made are mostly cosmetic, like new floors, baseboards, cabinets, countertops, maybe knocking down a couple walls and so forth these could be simple jobs that aren't too expensive, but can greatly affect the price of the house.
By considering these things before buying a house to flip, you can maximize your profits. If you flip it and decide to rent it out, talk to a place like Gerber Management Services for more information on managing it.
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About Me
Welcome to my website. My name is Larry Silva, and I want to talk a bit about private mortgage insurance. You may have heard the term PMI mentioned when you were in the process of purchasing real estate. When I first heard my lender talking about PMI, I was very confused. It was my realtor who sat me down and explained what private mortgage insurance was and when someone is required to purchase it. He told me that PMI is not lifelong insurance; it can be cancelled when the mortgage principal balance reaches a certain point. Once it was explained to me, private mortgage insurance was no longer a mystery or a confusing concept. I would like to pass on what I learned and hope that you find it to be of value.