Flipping Houses-What you need to know!

ISLAMORADA, Fla. - May 19, 2015 - PRLog -- Per Jan Keller, Top Producing Real Estate Agent for Coldwell Banker Schmitt, "Flipping houses is a very enticing investment opportunity, but, there are many things to take into consideration.

It’s not just cost, but also, the stress factor in having to complete a refurbishment on a set timeline. Property flipping is a risky proposition because there are so many unknowns. For instance, you can’t be sure that you’ll completely account for all that needs to be done to make a property marketable for sale. What’s more, you can’t guarantee you’ll stay under or within budget because unforeseen contingencies are quite common.

There are two common ways to make money on real estate investments: buy and rent or buy and flip. The former is generally considered the safest, simply because it typically doesn’t require a lot of costs that are a reality when it comes to selling. Selling expenses include marketing, commissions, and having money tied-up in the transaction.

More on The Basics of Flipping Houses

The single most important to understand about any real property investment is the fact that any money you’ll make is made at the time you buy. This is why savvy investors pass on dozens or scores of properties to find just one that is an incredible deal.

Generally, a good deal is one in which you pay under 20 percent of market value or less than 20 percent. This margin is necessary to hedge against all the costs you’ll incur and to make the equity position one that is more valuable from the beginning.

Everyone knows that you’ve got to put in a lot less than the ultimate selling price to make money, but, there are more considerations than just the purchase price and remodeling costs.

Flipping a Property with No Liability

In addition to the purchase price and renovation costs, there is also potential liability. These liabilities can be so costly that it not only turns a deal into a bad one, but one that is financially ruinous. Here are some ways to flip property with no liability:

● Form a legal entity. When you go into the business of flipping houses, you’re in business. That means you are personally at risk and that exposure is simply too great to leave to chance. Speak with an attorney about what types of legal entities are best for you.
● Issue 1099 forms. What many people don’t know is the taxes rules regarding contracted services. If you’ll be hiring plumbers, electricians, carpenters, and other contractors to work on you flips, you must issue each a 1099. If you don’t and are audited by the IRS, you’ll be responsible for those taxes.
● Have the right insurance. Just forming legal entity isn’t enough. You should also have the right insurance to protect yourself and not leave matters to chance.