INDIANAPOLIS, Ind. – Buying and selling homes, like they do on many TV shows, can certainly make you money. On the other hand, it can also be a big money pit. But if you work it right, you can increase a home's value and decrease your debt.
There are a variety of dos and don’ts when “flipping” a home. Flipping a house is when you buy a home that is rundown and you fix it up and sell it, hopefully for a profit. Keep in mind, you can make money, but you can also lose money.
“So what most people do wrong is they buy at the height of the market and they don't stretch their dollar by finding a good deal. So they should look at putting in a little elbow grease before and after they buy something,” said John Murphy, VP MJW Financial.
The home Murphy bought a few months ago is near Meridian and 91st. He’s a mortgage broker and house flipper. He says if you do things right, you can make money. He checked with realtors for what the home would be worth when it was fixed up and ready to sell. He also bought well under that price and put in nice touches. But as his friend and realtor says, you don't have to go crazy with finishes.
“If people can come into a house and see clean floors and clean walls, that's half the battle,” says Alex Montagano, a broker with EXP Realty.
Those are things anyone can do to save some money. In this case, the other finishing touches took skilled labor, because John wants top dollar.
Murphy shared some of the best areas in a home to spend money on: "Some of the common things to improve are bathrooms, kitchens, landscaping, driveways, simple things which cost good money but get good return as well," said Murphy.
John had all those things done and says the best returns come when you know what the fixes will cost before you buy.
"You can have vendors quote or give a rough budget for what things will cost. So if the house needs a new kitchen, prior to buying it, you can get a price for a new kitchen or a new bathroom," said Murphy.
After that, don't be afraid to negotiate with those doing the work and providing the materials.
"The deal of the decade is found once a week, if you call enough people. There's always someone out there who wants the job, who's great at what they do and they're willing to back off on their price that can really benefit you and help you with your budget," said Murphy.
Hire the right contractors, research, and get a ton of references because if their work is subpar, buyers will go elsewhere.
Finally, when you flip and fix stuff, you may want to consider getting a loan to pay for it, versus using your cash, as financing is still below 4% percent.
"So if they can keep their cash, which means maybe finance a little more money, they can take the difference in cash that they've saved, put it in the market and let their financial advisor do something for them with the rest of their cash," said Montagano.
As of today, this flipped house is on the market.