Reality TV shows have inspired people to flip houses for profit. They make it look fun, easy and the type of business anyone with some capital can get into. Of course, every once in a while these shows air episodes where homes under-performed resulting in a financial loss. Clearly, people in the flipping business need a cushion in case things don’t pan out. That’s why some speculators start out flipping land.
Flipping Land Is Less Risky Than Homes
Rough land can be far less expensive to invest in than blighted homes. There are also fewer requirements to getting the property up to standard. Investors won’t need to worry about replacing an electric box, mold behind walls or failing a building inspection. You may want to start with a modest out-of-pocket investment and work your way up to short-term lending to finance endeavors.
There are some things you need to keep in mind when selecting a parcel. Property that abuts a street with sewer and water are preferred to scrub land in areas without services. It is not uncommon to run into difficulty drilling an artesian well or getting a permit for a septic system. Developers know this and will jump at street-ready parcels first. Make sure the parcel can be built on. Then, either hire an excavation team to clear the property or do it yourself. The goal will be to create an open area where a home can be built while leaving suitable greenery.
Once you’ve completed excavating call a real estate agent and list the property. Land can earn several thousand dollars in profit with minimal effort. Remember to factor in hidden costs such as taxes, interest, and closing fees before you consider this option.
Move On To Spec Homes
After gaining experience in the land flipping business, take that knowledge and apply it to homes. But rather than scoop up a dilapidated structure, employ that land development acumen and take the next step. Select a parcel that is in a prime residential location. (You may find a wooded area at the end of a neighborhood that can be developed.)
Work closely with a real estate agent to understand the types of homes that will reap larger financial returns. With this information move on to finding an experienced and reputable contractor who can oversee the spec house project. Calculates the total costs and add 15 percent for overruns. Take that number to the bank for a building loan and put the team to work. Spec home projects can be listed with real estate agents even before the first nail is driven into a 2X4. A savvy real estate agent can get a property online with the design information alone. As an artful rendition of the finished home and key selling points will entice buyers. You may even find a buyer before the property is completed.
At the end of the day you can make a success out of flipping both land and homes. Start small with modest, low-risk land deals and work up to spec homes if you find success flipping land. All in all, you need to have an appetite for risk before you go into the property industry and be financially prepared if things don’t work out as expected. And remember to consult with your mortgage broker before if all begins, so that you can set yourself up for success. You need to establish if your vision is a reality or if there are additional financial steps you may need to take!
Happy flipping! There is a great resource below if you want to read more information: