Flipping a house means buying a home with the intention of fixing it up and selling it within six months for a profit. Americans flipped 26,947 single-family homes in Q3 2014, accounting for 4 percent of all home sales in that period, according to real estate data firm Realtytrac. The average gross return for investors was $75,990 per home, up 2 percent from Q2. Flipping houses can be profitable, particularly when home values are rising and interest rates remain at historically low levels. The Federal Housing Administration stopped enforcing anti-flipping regulations—which prohibited insuring any home for less than 90 days—in 2010. If you're looking to get into the home flipping business, follow these four guidelines for the best chance of success. Build a Bankroll Everything in life requires money, and house flipping is no exception. You could take out loans to buy properties, but then you are just creating debt in the hopes of making money. A smart house flipper who wants to profit immediately and often will use his or her own money. The best way to build a bankroll is by saving over time. Consider selling your own home if the proceeds will pay off the mortgage and leave you with enough to get started. Those currently receiving regular payments from a structured settlement or annuity can consider selling their future payments to a company like J.G. Wentworth for a lump sum of cash now. Make sacrifices like selling off an extra vehicle, disconnecting cable television and giving up the $5 lattes in the morning to pad your bankroll further. Buy at Discount You'll make the most money if you buy a house for less than its actual value at the time of purchase. The best way to do this is by seeking out motivated sellers. These are people who need to sell quickly to relocate for a job or simply need to make fast money. Use your social media networks to generate referrals. Inform friends and followers that you are looking to buy properties. Knocking on doors in prime neighborhoods can also generate leads—target homes with "for sale" signs and distressed properties that appear neglected. Location, Location The total value of all homes in the U.S. was $27.5 trillion at the end of 2014, according to data compiled by Zillow. That represents a 6.7 percent increase from 2013 and the third consecutive year of positive gains. But certain markets are doing even better. Denver, Miami, Atlanta, Houston, Orlando and Las Vegas experienced the largest gains for 2014, with each up at least 11.5 percent on the year. These markets offer the largest margin for error for those flipping homes, particularly with a major housing market correction being predicted by several economists for 2015. This is mostly due to the Federal Reserve ceasing its quantitative easing program and no longer artificially inflating the markets. A good rule of thumb when buying in areas that experienced low or negative year-over-year home value change (i.e., Indianapolis and Phoenix) is to only purchase homes at 10 percent or more below current market value. DIY Where Possible You'll likely need to hire plumbers, electricians and other contractors to tackle major home improvements. But the more you do yourself, the higher your profits will be. You and a few friends can install new sinks and countertops and even shingle a roof. Youtube has hundreds of instructional videos that cover everything from replacing water heaters to installing shower faucets. Creative landscaping can increase the value of a property by 13 percent, according to a study by Virginia Tech University. The DIY Network has several ideas for easy landscaping projects that anybody with a little ambition can complete. House flipping is a cyclical endeavor that is only profitable when economic conditions are positive. Now is a great time to get started.
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Summertime in the housing market brings countless buying and selling opportunities. But with all the competition out there, would people be better off waiting a few months? Real estate experts say no. They contend home prices peak from June to August and say there are advantages to buying during the market’s busiest season. But some agents disagree: A huge myth about the real estate market is that homes sell for more in the summer and less in the winter. This is simply not true. Other forces play a role in the asking price, such as the amount of homes for sale in an area, interest rates, and the job market. There are more homes on the market in summer than in the winter, and there is also a higher number of sales in the summer than the winter. Broader inventory means more choices, making buyers feel more confident in their search because additional properties hit the market every week, the large inventory offers significantly more opportunities for purchasers to identify specific floor plans, amenities, and locations. With more properties for sale, buyers may have more leverage in negotiating prices. Those who need to sell their current home to purchase another often find it easier to do in the summer months. If the client needs to sell a home before buying, the home will be more likely to sell, and potentially at a good price, allowing the client to purchase their new home sooner. I am a realtor and real estate investor based in Centennial, Colorado, With over 15 years of experience, I aim to help homebuyers make smart, strategic purchases. I advises first-time and “experienced” buyers alike to build a team of experts, scrutinize their finances, and remain in control throughout the process. Buying a home or investing in real estate is one of the most expensive and life-altering decisions most people make. Since it's not a topic that's heavily touched upon in school, most people end up "winging it" and learning on the fly. Sure, that's one way to approach it. A better way is to get familiar with important concepts and practices that can help you make sound buying decisions and avoid costly mistakes. As a real estate agent, investor, and coach, I've been through countless transactions with clients. My goal is always to provide a framework for buyers to make smart, strategic purchases. Here are my eight best pieces of advice for buyers: 1. Get educated on the homebuying process No matter how you slice it, buying a house is a complex process. There are a lot of moving parts — from submitting an offer and obtaining a mortgage to securing homeowners insurance and closing on the property. More often than not, I see buyers jump into it all without understanding the process at a high level. While no one expects you to know all of the ins and outs, it's beneficial to be aware of the major milestones and key players involved in a transaction. 2. Develop a real estate plan I've seen people spend more time mapping out their weekly meal plans than their real estate objectives. Buying a piece of property impacts many aspects of your future and it's worth taking the time to investigate loan programs and neighborhoods, and to learn about the full spectrum of housing options. Do you love post it notes, folders, and to-do lists? If you're an organized person who likes to plan, now is your time to shine. Having a high-level roadmap gives you direction and keeps you focused on your goals. It always helps to write down what you want to accomplish, the steps it will take to get there, and to come up with a realistic timeline to make it all happen. 3. Vet and hire experts As a buyer, you are only as strong as your weakest link and you want to build a winning team of experts to guide and advocate on your behalf. I would estimate that some of my real estate transactions have over 100 people involved. A lot are administrative personnel working behind the scenes, but a few are heavy hitters — there are realtors, loan officers, attorneys, escrow and title agents, just to name a few. Note: just because your friend has a real estate license and makes you laugh at brunch, doesn't mean she should be advising you in one of the biggest financial and emotional decisions to date. Build your team wisely. 4. Explore your housing options A single-family home is still the American dream for many of us. But, it's not your only option. It's worth considering other housing types, like a condo/townhouse or a multi-family property. There are significant differences in these home styles and unless you weigh out the pros and cons, you may miss a golden opportunity. 5. Scrutinize your finances Trying to keep up with the Joneses is a real thing in our culture. It's not uncommon for people, and especially young buyers, to stretch beyond their financial means in order to purchase a home. This can become a slippery slope. There's no need to set yourself up for failure and unnecessary stress by putting yourself in a position where it's going to be hard to make ends meet. Even though a bank may pre-approve you for a high loan amount, it doesn't mean you need to max out your budget. By carefully scrutinizing your expenses, you may realize that you should be both spending and borrowing less. 6. Focus on value as much as location We've all heard the expression that real estate is all about "location, location, location." I couldn't agree more that the geographical area where you buy has a huge impact on your lifestyle and your investing strategy, but I would also argue that finding a good value for your dollar is just as important. The biggest mistake I see home shoppers make is getting distracted by shiny objects, like stainless steel appliances and quartz countertops. Don't buy a house because it has nice barn doors. You can add these trendy décor accents into a space. Instead, you want to analyze the things that you can't easily change — overall square footage, the plot the house sits on, and the neighborhood. Don't forget to take a deeper look and assess the big ticket items like roofs, plumbing, electrical. Although not nearly as sexy as a dual shower head, this is where your money is actually going. 7. Advocate for yourself Caveat emptor — meaning "buyer beware" — was once a popular term used in the real estate industry to stress that the buyer alone is responsible for checking the quality and suitability of a home before the purchase is made. Over the years, laws have tightened up to protect consumers. Naturally, this makes it easier to point blame when things go wrong. Trust me, in my earlier days investing in real estate I was guilty of this myself. The blame game isn't good for anyone and having that mindset is useless. Know that as a buyer, you are your best advocate and you are accountable for the decisions that you make. Do your research and take advantage of your due diligence period to ensure you are confident in your real estate endeavors. 8. Remember: You are in control In this crazy hot market, it's easy to get carried away in the drama of multi-bidding wars and spending more than you can afford. There's no doubt that you have to be aggressive and proactive these days, but not to the point of losing control. Remember, you are in the driver's seat. Having a plan, knowing the process, building a good team, analyzing your finances, and doing your research will help during times of chaos.
Whether a home survives a wildfire is not random, nor is it a function of luck, most homes that exhibited attributes promoted by the FireSmart program -- including keeping combustible vegetation away from the house, uncluttered yards and low-flammability roofs and surfaces -- survive fires. It seems clear that the survival of homes was a function of resistance to ignition and not a random event or a matter of luck, Beyond doubt, risk mitigation (FireSmart) guidelines demonstrated their effectiveness in mitigating risk under the harshest of wildfire conditions. Most homes caught on fire as the result of embers from the forest fire landing on their property. "Based on site visits, no instances were observed where home ignition could confidently be attributed to direct contact by flames of the burning forest, and there were very few observations where home ignition was likely due only to radiant heat from the forest. Other studies have shown that embers generated by burning vegetation are common at distances of 300 to 1500ft, can occur at distances as far away as 8 miles and have been recorded as far away as 15 miles. A new FireSmart Home Development Guide was recently released to help homeowners reduce the risk from wildfire. It's produced by FireSmart Canada, a national program designed to reduce wildfire risk that is administered a non-profit coalition called Partners in Protection. The guide recommends that homes in wildfire-prone areas should have a simple roof design, made of non-combustible materials such as clay tile, concrete tile, metal or asphalt shingles. It should have few places where embers or combustible materials can accumulate. Proper maintenance of dormers, skylights and solar panels is recommended. Roof vents should be screened. Soffit vents can pull embers into the home during a fire so they should be screened as well. It says some types of siding, such as vinyl, can melt when exposed to high temperatures, allowing the fire to reach the underlying wall components. Stucco, brick, fiber cement boards/panels and poured concrete offer better fire resistance. Multi-pane, tempered glass windows are recommended. Garage doors should fit properly with no gaps to allow for embers to enter. Maintaining and removing combustible debris (such as lumber, stored vehicles, branches, grass and leaves) and firewood near the exterior walls will reduce a building's vulnerability to ignition during a wildfire, It is important to inspect your vents and openings regularly to ensure the vents are in good repair and remove any combustible debris. Gutters and downspouts should be made of non-combustible material and should have a metal drip edge and a gutter guard. For decks and porches, "the materials used to build the deck, combustible materials you store under your deck and the vegetation around it all contribute to how vulnerable you deck will be," says the guide. It suggests sheathing the underside of the deck or balcony with fire-resistance sheathing. Surround it with materials such as rock mulch, gravel, brick, concrete pavers or stones to prevent vegetative growth. Landscaping is also an important part of making the home more fire resistant. The guide says there should be a 5ft horizontal non-combustible surface perimeter along the outer walls of the house. Within 30ft of the structures, avoid using any woody debris such as mulch. Plants to avoid are cedar, juniper, pine, spruce and tall grass. "A mowed lawn is a fire-resistant lawn. Grasses shorter than 1/2 inch in height are less likely to burn intensely," says the guide. Any place where conditions allow for ignition and spread of fire between structures and vegetation -- the wildland-urban interface -- people are more exposed to the risk of wildfire and that needs to be considered and managed by all stakeholders. Preparing for the threat of a wildfire is a shared responsibility that will only grow in importance as climate change and other factors continue to increase the risk. By Jim Adair Colorado often experiences severe hailstorms that can cause devastating property damage. The Rocky Mountain Insurance Information Association reports that Colorado’s Front Range and Wyoming’s eastern plains, commonly referred to as “hail alley,” receive the highest frequency of large hailstones in North America. Over the past 10 years, hailstorms have caused nearly $1.7 billion in damage to roofs and automobiles in hail alley. The damaging hailstorms generally occur mid-May through late July. Damages incurred to roofs during hailstorms can, however, be reduced with proper roof design and roofing product selection. A properly designed roof structure can substantially reduce hail damage. Several testing agencies have developed the following recommendations for the roof designer: Shingles made with polymer-modified (SBS) asphalt have better resistance to hail damage than shingles made from oxidized asphalt. Reroofing over an existing shingle system greatly increases the chance for hail damage. Increased roof pitches, particularly those over 6:12, can dramatically improve hail resistance. The use of a thin, single layer of underlayment improves the hail resistance of the shingle roof. New underlayment products are available, which are much thinner, stronger and allow for better air permeation than traditional asphalt-saturated roofing felts. Rigid roof decking improves the hail resistance of the shingle roof. Tongue and groove decking or well-supported plywood sheathing creates a more hail-resistant roof. The selection of a quality shingle is also very important. In 1996, Underwriters Laboratories developed Test Standard UL 2218 to classify the hail resistance of roofing products on a four-point scale. Per Test Standard UL 2218, steel balls are dropped from different heights onto roofing products. The product’s ability to withstand the impacts of the simulated hailstorm is then quantified. Roofing products receiving a score of 1, referred to as Class 1, are most likely to be damaged during a hailstorm, while products receiving a Class 4 rating are expected to provide the greatest protection from hail impact. For instance, a standard wood-shake shingle, because of its susceptibility to hail damage, may receive a Class-1 UL rating, while a polymer-modified asphalt shingle or concrete tile may receive a Class-4 rating. It is therefore possible to design and construct a roof that is nearly resistant to hail damage with the right combination of a high-quality shingle product, a thin layer of underlayment and rigid decking material all installed on a well-pitched roof. This optimum design and construction approach is great for a new home; however, those of us with older homes have no intentions of replacing all the roof decking material or changing the roof pitch. We can, though, adopt a few of the measures described here when undertaking a reroofing project. Removing the existing roof (or roofs), installing quality underlayment and a Class 3 or 4 shingle will greatly enhance the hail impact resistance of our roofs. But what about the economics of purchasing these better, hail-resistant shingles? Many insurance companies offer cash incentives to their customers, some as high as $500, if a higher UL-rated shingle is purchased for a reroofing project. Other insurance companies prefer to reduce their customer’s annual premium for the selection of a hail-resistant shingle. Are these monetary reimbursements or savings a good deal for the homeowner? Let’s look at an example using a basic residential home with a roof area of approximately 2,000 square feet located in a high-risk hail region. The installation of a standard 20-year asphalt shingle, possessing little hail resistance, will cost approximately $1,800. Assuming that the roof requires replacement (due to hail damage) three times over the 20-year life of the product (as was the case for our sample home), the total cost to the insurance carrier (neglecting inflation) could be as high as $5,400 over 20 years, or approximately $270 per year. The installation of a polymer-modified asphalt shingle (Class 4), with a life expectancy of 30 years, will cost approximately $2,500. Assuming that the insurance carrier pays only for the replacement of a standard shingle roof ($1,800), and that the polymer-modified roof still needs replacement approximately three times during the product’s expected life, the cost to the insurance carrier will be only $5,400 over 30 years or $180 per year. Not surprisingly, the use of a hail-resistant shingle equates to cost savings for the insurance company, but what about the homeowner? Referring to our example above, the initial impact to the homeowner, who now must pay the difference in cost between the standard and hail-resistant products, is approximately $700 each time the roof is replaced, or $2,100 over a 30-year period. If the insurance carrier provides a $500 cash incentive each time the roof is replaced, the homeowner is now out only $600 over the 30-year period. Conversely, if the insurance carrier offers a premium discount, the total impact to the homeowner is reduced. Assuming an average annual premium for our sample home of $800, and further assuming our hail-resistant product qualifies for the maximum discount offered by the insurance carrier (25 percent), then our homeowner will be saving $200 per year in premiums, or $6,000 over 30 years. The total impact to the homeowner of $2,100 now becomes a savings of $3,900 or approximately $130 per year. The selection of a hail-resistant shingle, in conjunction with an incentive from the insurance carrier, is a cost-effective alternative for both the homeowner and the insurance company. To make this program a reality, however, the insurance company must educate the homeowner on the potential long-term cost savings that are associated with the installation of the preferred roofing system. |
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