When And Where To Buy Real Estate For Resale
When And Where To Buy Real Estate For Resale
Michael Corbett (Real Estate Expert) gives expert video advice on: What are the various timelines for flipping a property?; How long should I hold a property that I want to flip?; When is a good time to buy real estate to flip? and more...
What are the various timelines for flipping a property?
There are three different flipping paths. One is slow-and-steady, which is buy property, move into it for two years, fix it up and sell it in two years. In two years you're going to live in it and sell it and be able to take advantage of the tax advantages. Then sell it, take your profits and buy another one and live in it for another two years. Continue to do that for four or five times. After that, you'll eventually be able to buy that fourth of fifth house for cash because of the money from the profits you've accumulated. That's one path, another path is buy a house, fix it up, flip it, sell it and then get into the next one. You've done it, you've gone through the process, you understand. Now maybe the next one, stay in for two years. There is no set way you have to do it. The beauty of flipping property is you can do it one after another or you can do them slowly, every two years, every three years. The trick is, do it, get your first one done and under your belt, understand the process.
How long should I hold a property that I want to flip?
There are lots of advantages and disadvantages to flipping quickly, or then selling and then holding. So there are lots of ways you can do it. It has to be a lifestyle choice for you. If you are doing this as a second revenue stream, then you can flip a property, and sell it, and keep doing it, whatever time permits. The only trick is when the markets fluctuate, which they do now, right now we are in a downward spiral, you don't want to be projecting too far in the future, because you don't know exactly what's going to happen in two years. We do pretty much know that in six months the market may be deflated by five percent, or may be inflated by five percent. You can usually most indicators give you a good six months overview. So it's hard to project out two and three years but make sure that if you do buy a property, that you have an exit plan for that property. Which means you can either choose to live in it if the market does go bad, or you can choose to rent it and cover it. Because you never want to be trapped buying a property and then being stuck with it and having to sell it. You want to know you can rent it or keep it for yourself.
When is a good time to buy real estate to flip?
I've been going around the country lecturing about real estate with Donald Trump, and the funny thing that Donald Trump always likes to say is, “The best time to buy real estate is when other people are selling.” Right now, people are selling and they will probably continue to sell over through the next year. The best time to buy real estate is when the market is going down, because that's when you are going to get the best value.
Where should I buy property if I'm a first time house-flipper?
The greatest piece of advise I can give anybody as to where to buy a property if they're going to be buying properties to flip, is to do it within driving distance of where you live. You need to be able to check on that property everyday while it's in the process of being fixed up. People make huge mistakes by buying out of state, or buying two and three hours from where they live. It's an enormous mistake, don't do it! You need to check on that property every single day.
What kind of neighborhoods make the best candidates for house flipping?
When you're looking for fixer properties, it's location. You always want to buy the worst house on the best block. Many very well established, beautiful neighborhoods don't have fixers that are going to actually afford you the opportunity to make a lot of profit on them, so you always want to go right next to the best neighborhood or look for the property that's in a neighborhood that we think is going to be upcoming, and that's called a transitional neighborhood. It's very much about trying to find the best property in the best neighborhood for the money that you have.
What factors should I look at when evaluating a location for a house-flip?
When you're buying a property, you're not just buying a property, you are buying a neighbourhood, so you want to make sure that the neighbourhood itself is solid. So you want to check things, like what's the school system like? Is there shopping nearby? Is there access to freeways? Is there Public Transportation? You want to know the neighbourhood. Now chances are it's going to be near somewhere where you live, so you're going to have some knowledge of it, but the buying in the neighbourhood is just as important as the house you buy.
What's the secret to choosing a neighborhood that is increasing in value?
I'm a big believer in buying in transitional neighbourhoods. I've done it for many, many years. I've bought property in Jersey City when it was just coming up and now you can't get in there outside of Manhattan. There's lots of transitional neighbourhoods. Here's a great secret: If you're trying to find a transitional neighbourhood, look for a neighbourhood that looks a little bit transitional but has just put in a Starbucks. I'll tell you why, and it's because they spend an enormous amount of money on research of what neighbourhoods are good, where people are going, and the relevant population. If they're putting in a Starbucks, I can promise you that it's a neighbourhood that they believe is on the rise.
What is 'gentrification'?
Gentrification actually means a neighborhood that has been in transition and is becoming more and more gentrified. This means the homes themselves are being worked on and renovated. The school system is being improved, shops, Starbucks, restaurants, and amenities are moving into a neighborhood. When a neighborhood is poised to be gentrified, that's where you want to be. Once it has become gentrified it is beautiful established neighborhood.
What neighborhoods make good candidates for gentrification?
When you're looking for neighborhoods or areas, you want to look for neighborhoods in areas that have some kind of amenity or some kind of draw. Of course anything that's near a lake, or a beach, even though that may be very priced out if you're starting to get in the market. Or things that have cultural elements to them, cities that are actually improving and growing. A lot of the southern cities now are having a big draw because of people who are retiring down to the southern states. You want to look for areas and cities that have some sort of draw because draw creates population, population increases the value of the property.