When I flip houses in a rising or steady market, my goal is to earn at least a 20 percent return on my total investment. To determine how much I can invest in a house, I start with the price I think I can sell the property for after fixing it up and I divide by 1.2. For example, if I think I can sell a house for $200,000 after repairs and renovations, I divide $200,000 by 1.2 and come up with something in the range of $167,000. I then subtract what I expect to pay in repairs and renovations, realtor commissions, and holding cost (utilities, taxes, and insurance for the duration of me owning the property). This gives me a ballpark idea of how much I can pay for the house to earn a 20 percent profit. If I add up all my estimated costs and come up with $30,000, for example, I could then afford to pay up to $137,000 for this house I plan to sell for $200,000.

In a declining market, I might start by dividing what I think I can sell the house for by 1.3 instead of 1.2. In the example of a $200,000 house, then, I would give myself only about $154,000 to invest, so I would have $13,000 less to invest in the project to be fairly certain of earning a 20 percent profit. In other words, I would be looking to buy the houses for 10 percent less than I would normally pay. In our example, I would be able to pay $124,000 for the house I plan to sell for $200,000, because I probably wouldn't be able to sell it for $200,000 a month or two after fixing it up.

Also, don't forget about the SHORT SALE market. You WILL need this report (click now).

 

I hope this helps all of you potential investors. (provided by agentdirectnews.com)