May 9, 2021
Blog 14: Real Estate and the true costs behind flipping homes
Flipping homes is one of the best ways to make a living or even a side hustle out of residential real estate. So what are you gonna need? Well, we’ll go over that and more, in this blog, we’ll also go over the true over head of the land and other costs including getting a loan and other costs involved but if you have no idea who I am well stay tuned because this is about to get real.
Introducing Me!!!
Before we dive in allow me to introduce myself, My name is Akshith Konda. I’m a 21 year old College Student and I am the CEO, Writer, and, Author, and Editor of The Finance Spot. It’s just something I do for fun, I’m also the CEO, Main Host and Business Director of the On Your Own Two Feet Podcast.
I write easy to understand and simple content for any age group and level of understanding. If you wanna know more about the Podcast here’s a summary.
On Your Own Two Feet is a motivational/sociocultural podcast in which we dive into the big topics of human, cultural, and philosophical lifestyles, making it engaging, entertaining and easy to understand for today’s youth and Tik Tok Generation.
OYOTF seeks to inspire a new generation of Entrepreneurs and Visionaries to tackle the issues of modern society. Join us as we talk with new Entrepreneurs and discuss their paths and the difficulties they faced.
Our first episode Has aired only on Spotify. We ran into issues getting it on to other platforms, Episode 2 may not air till after May 13th.
All members of the OYOTF team are college students and it’s finals week so yea…. we’ve got our first interview with a couple of Entrepreneurs and we can’t wait to show you what’s next for OYOTF, we’ll still be here with plenty of jokes and wise cracks all over Elon Musk’s SNL performance and Dogecoin… is that too much… LMK in the comments below.
How do you flip a home?
First you gotta get yourself a home, now you can find a home in your local townhome complex or a regular neighborhood for a cheap price using a loan as you would.
1.Finding a home and making an offer
Using tools like Zillow and other pricing tools will allow you get an estimate of how good of a loan and an offer you can make. Using many of its tools, you can also find and screen tenants and other occupants. Making an offer on a rental property is a bit different because most likely this property is going to be placed under an LLC to be maintained by the LLC as you may be the only owner in this LLC as well, if you need to know more, click here to read my article on Business Types.
2. Fixing the place up.
So to sell a place you may need to change the tiles in the living room, the flooring, paint the walls, change the appliances, or even replace the plumbing and A/C systems. This may eat out of your overhead costs at about 30% of the cost, if you rent out the properties you can use part of the rent to pay off some of the costs the property may come with.
3.Creating a listing.
Using Zillow and other house search engines and services to sell or lease your new house is important. You need to be able to sell the house in the best possible light. You’ll deal with tons of issues over time and you need to minimize that factor of the house but you need to state things that would attract your ideal buyer.
4.Finding the right buyer
Each home has its designated buyer but because a home is designed for a person in tastes doesn’t mean that he or she can have it. The City or State your property is located in plays a huge role in that. You need good credit and no evictions for yourself or your spouse for most landlords to consider you for a property, if you you have either bad credit or an eviction history, your landlord might reserve the right to raise your rent by a hair, now what is good credit for a house?
So… What is good credit on a house?
The Credit Spectrum goes from 0 being the absolute worst to 800 being absolutely perfect. If your score is within the 400 mark, you are eligible for a decent townhome, if your score is in the 500 mark, you can approach someone about a small one story home, 600 can approach a medium size to large home, 700, large home to super large home.
500 is just a recommended frame of mind for any home it works the same really for any major purchase.
For buying a car, it works the same as well, you have a good credit score, your more likely to get a good car and a good deal, take a look at Blog 2 for the Principles of Negotiation
Just bear with me on this. how much should you charge in rent. For all my landlords and future landlords… this is how much…. Honestly, I have no idea.
It varies based on home net value, let me give you an example. You have a good home in Texas, good location, good place, developing area, good people, nice price of 150.1k, on that, you’re gonna pay about 1000 a month in mortgage, a good practice is to charge about as much as you would if you were living there under the bank + a margin of profit per home so 7.5% so you would charge about 1100 per month, not including utilities about 400 extra, you would also need to prior to creating the lease you need to charge a security deposit of at least one month’s rent to ensure you have a tenant.
Next, let’s talk about profitability.
When will I reap the benefits of my investment?
Investing in a home requires a lot of prior costs like factoring in house quality, repairs, rooms, area, and more, but in the end based on how you do it. Buying and selling or leasing out homes in most areas is still one of the best side hustles you can have.
So what are the costs of Flipping homes?
Loan Payments: Based on the type of home these payments can be a large problem for a few years. Some landlords buy homes in cash to avoid this but others take the long route with a higher down payment to
Maintenance: Usually eats at your annual overhead but expect a few calls from your tenants about every 3 months.
Realtor and listing agent fees: Realtors sell and lease properties so if you’re gonna do this you’re gonna need one to do all of this, so Realtors for leased properties usually get some parts of the commission for flipped to buy properties but for leased properties they usually get a small percent of the security deposit.
Cleaning and other fees: May come along with maintenance and other costs and usually costs about 100–300 per property per lease.
Showings: Some listing agents have fees for getting possible tenants to homes and these fees are not much in comparison to the commissions some may demand if they were selling the home.
You would actually begin to see profitability in 2 ways but only if two things happen, you pay off the property or properties, and if your property appreciates over time and you manage to sell it.
This is the end of the line for what I know, Guys,I’ll see you next week… It’s not over yet
Conclusion
Before we go, I need to say thank you to all my followers on Medium. Please Like, Share and Follow.
If you liked my content, Check out my blog and other content with all the links are below. Check out my other content, like my Instagram and YouTube, and my other social media. The link is below.
Find me on Instagram and on Twitter and do DM me about questions to talk about and write about in my blogs and videos.
Listen as well to the On Your Own Two Feet Podcast. EP2 will be on other platforms, we’ve got a great interview coming your way as soon as May 19th.
The On Your Own Two Feet Podcast will be Available where ever you listen to podcasts Episode 2 will drop sometime in 2 weeks. But be on the lookout for some bonus content like bloopers or other segments we want to air might be airing soon actually (;. No joke there are soooo many… I swear we all died laughing making it.
Thank You and see you next week.
*Sorry this blog was late.. Wanted to publish this earlier but was with a friend till midnight.
