Owning a home may be the American dream, but many people are dreaming about making money in real estate. We have all read stories about someone that made millions in real estate. The fact is many people are living out their dreams buying ugly houses and then selling them weeks or a few months later – often for beautiful profits.

But how are some people able to do this, sometimes even the newbies?

Not surprisingly, there are some rules to follow. And the more attention you pay to the rules, the better the chances of you earning some serious money. I got my start in real estate several years ago by “flipping” houses. What is house flipping?

Flipping a house is the process of buying a house in need of repairs, at a price much lower than market value, quickly adding value by making the necessary repairs to get the house to market standards, and then selling the house for a profit. And you do this by using little or none of your own money. Sounds easy enough, doesn’t it? But flipping houses is not the path to get rich quickly, and it’s certainly not for everyone.

Here are some rules to follow if you decide you want to make some good money investing in real estate – especially by flipping houses.

1. Use The Formula. Buying the ugly house at the right price is crucial in making a profit. You actually make your profit when you buy the house, not when you sell it. You realize your profit when you sell it. Remember that what you get for your house after you fix it up will depend on what similar properties are selling for in the area. It will have nothing to do with what you spent to repair the house.

The following formula has worked well for me and it will work for you:
a. Determine the “After Repair Value” (ARV) of the house you’re considering to purchase. Generally, you can determine the ARV by obtaining a list of comparable sales (“comps”) in the area from a realtor. If relying on comps, be sure you obtain the actual sales price of houses sold and not the list price. Determining the likely sales price of your house is the starting point.

b. Subtract your total costs from the sales price:

* Closing costs

* Loan fees

* Document preparation fees

* Homeowner’s insurance

* Title policy

* Repair costs

* Interest on the loan

* Property taxes

* Sales commissions

* Other fees

You will want to project your costs based on four majaor categories. Buying, Repairs, Carrying or Holding, and Selling. After you determine your estimated costs from all four categories, subtract your total costs from the sales price.

c. Once you subtract your costs from your anticipated sales price, you will generate your estimated profit. You will have to decide how much of a profit you want to make on the deal to make it worth the effort. When you determine your desired profit, you’ll have the highest price you will want to pay for the house.

If you consistently use the formula, you will make better and faster decisions regarding a potential ugly house. Always start with the after repaired value and then work your way through the costs to calculate your desired profit. Also, do not let your emotions get away from you and make a seat of the pants decision that you will regret later. If the numbers don’t add up based on your desired profit, move on. There are plenty more ugly houses out there. Just be patient.

2. Work With An Experienced Realtor. I find it incredible, but too many investors think that all realtors are created equal. Not true. If your goal is to buy run down houses, then you need to find a realtor that specializes in foreclosures, HUD properties, etc. I actually had one fairly inexperienced investor tell me that he thought any realtor could help him achieve his goal. It’s possible, but not probable. To get the right result, you have to go to the right realtor.

Doctors are doctors, but some have their own specialty. If you have a serious case of the flu, would you go to just any doctor to help you get over your misery? For example, would you go to a gynecologist? Of course not. So why go to just any realtor to help you find distressed properties? You get the idea.

3. Use Leverage. Aptly named for the lever, you’ll want to take full advantage of leverage because it is the key to wealth in real estate investing. Leverage is the use of borrowed money to increase your profits when you buy an ugly house. Using little or none of your own money to buy more houses allows you to make a beautiful profit on someone else’s money.

Although your goal should be to buy property for thousands below its value, and you can sometimes buy it with no money down, it is important to understand that it does not necessarily mean that the seller doesn’t receive any cash money at closing. Rather it means that there is little or no money out of your pocket to make the deal.

Some investors think there is something wrong with using someone else’s money to buy houses. Well, for most working families, leverage provides them with not only a roof over their heads and extraordinary tax relief, but also the single best investment they’ll ever make.

Most real estate investors work hard at house flipping, have a long-term plan and stick to it. You can certainly shorten your journey to achieving your financial goals by using leverage.

4. Use Psychology. When fixing up the house, let psychology drive you. It’s not you who has to like the house. Your potential buyer has to like it. Remember, you’re not going to live in the house, so don’t go overboard on the repairs. If you have carefully defined your niche market, you will know their likes and dislikes. Make the right repairs to get the house to market standards and then stop and put a “For Sale” sign on it. I have talked to new investors who frankly admit to doing too much to the house, but they couldn’t help themselves because they didn’t like the way it looked. Doing too much to a house is no different taking your money and throwing out the car window. Either way you lose.

There is almost no other business that allows you to buy ugly houses and make beautiful profits with almost none of your money in a short time. It’s common knowledge that more millionaires made their fortunes in real estate than in any other business. So what are you waiting for? Rehabbing ugly houses can give you beautiful profits.

By: Lee Salinas

About the Author:
Lee Salinas, MBA, CPA is a full time real estate investor and the current President of TxREIA. Lee started investing in real estate three years ago after losing his job in June 2002. In three years, he has purchased over 140 properties and authored a business plan to help real estate investors get the cash they need to buy properties. The real estate business plan is available at his website – [http://www.realestatebizplan.com]

The most important thing to do in any rehabbing business is breaking the rehab process down into stages. This will ultimately allow you to systematize the entire process in order to remove any guess work as well as allowing you to continuously duplicate the process.

It is important to first educate yourself by learning the prices of labor and materials as well as finding, prescreening, hiring and managing “mature”, “grown-up” contractors in your area. This is the foundation of a successful rehabbing business. Knowing the prices of labor and materials, terminology, & required tools will allow you to better communicate and gain the respect of all contractors.

Step 1: Initial walk through

The initial walk through is where you will do the majority of the legwork for the rehab. There are certain things you will need to bring with you to the walk through of the property:

- A digital camera – taking pictures will allow you to reference the property when creating your scope of work. Pictures will also be necessary down the line if you’re going to sell the property retail to an end-buyer using conventional financing. You will be able to provide your before photos and scope of work to the lender as evidence as to why you’re re-selling the property for a large profit in a short period of time.

- Property inspection form & graph paper – This is where you’re going to spend most of your time during the initial walk through. At this point you’ve already done an initial walk through and you’ve presumably done a property inspection form. When going through the property inspection form you need to detail the improvements that “need” to be done and you’ll also want to look for potential extra improvements that can be done to increase the saleability of the property when re-selling it to a retail buyer. You can use the graph paper to sketch a layout for referring to during the scope of work.

- A lock box with keys – Putting a lock box with a key in it on the property will help to save time and will allow contractors access as needed. This will help everyone work more efficiently and will save you from unnecessary headaches during the rehab process.

- Advertising materials – You should always bring advertising materials to leave at the property during the rehab process. This of course will help to promote your business. You may want to put a sign on the front lawn, a box with flyers about the property and project in it, or even a banner outside the property.

- A Flashlight – It’s always a good idea to bring a flashlight with you in case the power hasn’t been turned on or doesn’t work. You don’t want to waste a trip and not be able to complete the walkthrough.

Step 2: Scope of work

The scope of work itemizes exactly what needs to be done throughout the entire rehab process. When someone is done reading the scope of work they should have a clear vision of what the finished property will look like. You will reference the scope of work during every step of the rehab process. It will list all of the exact materials, paint, carpet, siding, etc that will be used. All the materials need to be listed along with their cost. This will not only save you an incredible amount of time it will also eliminate any discrepancies with contractors and other workers and provides accountability.

Step 3: Contractors & Job Bidding

When it’s time to start getting contractor bids you will want to make sure to bring in multiple contractors and get multiple bids. You should provide a nice professional looking scope of work. If you provide a standardized quote itemization form and leave them at the property for the contractors bidding the job they can fill-out their material and labor charges for every component of the job and send it to you. Also with these bid sheets you’ll also gain the knowledge of pricing as you read over these multiple bids from contractors. Plus, you will know exactly what contractors are charging you for every single component of the house rather than just giving you a flat price for the entire job. Therefore if you have a particular aspect of the job that was priced significantly lower by another contractor (i.e. roof) you can plug another contractor into that specific element of the job and save money. Hiring the right contractors in by far the most important element of any successful rehab project.

Step4: Contracts & Documents

Now that you have all of your contractor bids and have evaluated and made your decision it’s time to sign the appropriate contracts and documents. The liability of getting all the necessary documentation signed is something you always need to adhere to. Don’t even think of doing a rehab and working with contractors without all the documentation property filled out and signed. Once you’ve selected the right contractor for the job you will want to sit down and have your initial meeting.

This is where you will discuss the scope of work and make it clear that you will be watching every move they make. You need to explain what your expectations are and lay out the parameters of which they are to work within. You are the boss. They work for you. You will also want to use your own paperwork and contracts only. Just explain to them that it’s the way you do business if they want the job. There are six essential documents; independent contractor agreement, scope of work, payment schedule, contractor insurance indemnification form, W9 tax form, and final unconditional waiver of lien. You will find that a quality contractor will be excited and appreciative because they are working with a professional, there is clear communication and they have the scope of work and know exactly what the expectations are.

Step 5: The Rehab Process

This is where you get into the actual rehab itself. The key component is having been prepared for this stage of the process prior to actually starting any work, which is why the steps leading up to this are so important. Doing all your due diligence is key to a successful project. Before starting any type of work it’s time to pull permits and get inspections coordinated. You will want to have one last meeting with the general contractor (GC), tradesmen, carpenters, etc in order to go over the project and to make sure everything is in order. All the tradesman, carpenters, etc. need to know that the GC is in charge and that they need to refer to him for any construction questions. The GC answers to you.

There are five major milestones for the permits and rehab process in general. The milestones are clean-out, frame-out, rough out, insulation and finishing. You begin by cleaning or gutting the property, as needed depending on your scope of work. Then you will proceed by framing out all the rooms and marking every aspect of the layout such as tubs, sinks, toilets, stove, phones, etc. so that the plumbers and electricians know exactly where to “rough in”. Next the electrician will come in and hardwire with new wire, cable smoke detectors, etc. The plumber will do the plumbing in kitchen and baths, the heating (HVAC) specialists will rough out the heating/cooling system – duct work, baseboards, etc. When the rough inspection is complete then all the insulation is put in and then that is also inspected. Once the insulation inspection has passed you can now sheetrock, tape, sand and get ready for trimming out the property. Once trim is done it’s time to paint. Once the paint is done the electrician and plumbers come back to trim out or drop fixtures. The last thing to always do is flooring and carpet. Once that’s all done it’s time to get your final Certificate of Occupancy (CO’s). Your last round of inspections to obtain your CO follows the same order of the rough inspections. First all of the subcontractors must get their final inspections okayed before the final building inspector comes to give a CO.

Step 6: Contract Closeout

Once the job is complete it’s time to do a walk through with a final punch list. There will be things that the contractor missed or need to be touched up or re-addressed. Make notes on the punch list of everything that needs to be finished up before they receive their final payment. Once they’ve complete that final punch list and you’ve approved the final product they will sign the unconditional waiver of lien and they get their final payment. Getting the lien waiver signed, a copy of the final CO and completing the punch list is crucial. Make sure not to give the contractor their final payment until those items are taken care of.

Step7: Final Touches

Now it’s time to critique the house as if you were a potential buyer. The first thing to do is get the house cleaned. You need to make sure that the house is not dirty when buyers come to look at it. The second thing to do is stage the house. Since the house is vacant you want to stage it to visually optimize the space and highlight each room. Staging a house should not cost you more than $500. It will easily pay for itself by getting the investment back ten fold, so don’t underestimate what staging can do. After the property is cleaned and staged go back with your camera and take after pictures. It will act as a documented copy for your files. Adding these to your portfolio will help to add instant credibility for future jobs. Finally you’ll need to change the lock box code in order to prevent against theft. This is an important step.

The value from breaking the rehab into stages allows you to manage the process through a series of systems and checklists. It will help to not only insure a smooth and efficient process but also will add value to your projects and save you time and added risk. Most importantly it will help to guarantee larger profits.

To receive more information and your FREE report entitled “How To Buy A Wholesale Deal Without Taking A Bath” go to: http://www.stswholesaledeals.com/

By: Steve Teta

About the Author:
Steve Teta is the owner and Founder of STS Real Estate Solutions, LLC and is an active real estate investor and wholesaler. To receive more information and your FREE report entitled “How To Buy A Wholesale Deal Without Taking A Bath” go to: http://www.stswholesaledeals.com/

When it comes to buying investment real estate, there are many schools of thought on how to get the most out of your money. Some say lease optioning your houses is the best and safest way to go. In fact, I believe this to be true in many cases. For getting the most out of each investment dollar, though, and seeing a quick return, I believe that it is best to find property that you can rehab and resell.

Many people have tried this strategy and failed. Let me tell you why this is. Anyone can make money buying investment real estate, fixing it up and reselling it, as long as he or she understands how to buy and how to sell. This is the key. The people who fail in the rehab strategy of investment real estate fail because they know everything about rehabbing but nothing about buying and selling.

The real money is made by carefully evaluating the entire transaction. This includes looking at what the investment property will bring on the back end, or on the sale. Now, when you find a prospective investment property to buy and rehab, be sure to look at your profit after all of our money is spent.

I would never consider a deal that I couldn’t make at least 40 percent above my purchase price and all I’ve put into it. So, if I pay $40,000, put in $10,000, I want to sell my investment property for at least $60,000. If I can do this in one month, I’m happy, as long as I’m not splitting my profit with too many parties. Even if I have a partner or two, a quick $10,000 in one month is fine, as long as I have another deal going at the same time.

Now, if you want to move your properties quickly, and a month is not a reasonable time, you might consider combining two strategies – buying investment real estate for the purpose of rehabbing and quickly lease optioning the property. From there, you can move on to your next purchase.

Mark Barnes is an investment real estate and real estate finance expert. Get his free mortgage finance course at http://www.winningthemortgagegame.com. Mark is also the author of the new novel, The League, a shocking, sports-related conspiracy. Learn more about his suspense thriller at http://www.sportsnovels.com. He is also

By: Mark Barnes

About the Author:
Check out powerful credit information now at Credit Champion and loan information at Direct Lending Solutions

Many have wanted to venture into real estate. It proves to be a very profitable business even if the world continues to face financial crises. In fact, many had quit the regular day job just so they could go on full time with real estate investing. Rehabbing homes is one of the hottest trends in the industry today. The business can be very lucrative especially if you know how to go about every process. If you are still having second thoughts, read this article now and learn the fun part about rehabbing homes.
You manage your time. You no longer need to drag yourself out of the bed whenever the alarm clock beeps. One of the benefits with rehabbing houses is that you can control your time. You can work after you have sent all the kids to school. You can sleep all you want. Sleep is a luxury, which you cannot seem to have if you go work in a corporate set-up. If you take on rehabbing houses as a venture, you can take long sleeps anytime of the day. Every night is Friday night! Have you ever felt deprived having no time to meet the gang for a drink or two? Now, every night is a Friday night! Get all your tasks done during the day and feel free to meet your friends whenever you want. Drop the dress codes. Another benefit about getting into real estate is that you can wear anything that you want. No more strict corporate dress codes, no more high heels – this time, it is your call. You can be as fashionable or as laidback as you want to be. You meet people from all walks of life. Rehabbing houses is all about PR, marketing and sales talk rolled into one. This simply means that you will meet a lot of people every day. Socialization becomes a huge part of your job. Big bucks! The corporate world can offer one security but how come many individuals are still going to real estate? The reason is very simple – it offers big money. You close one deal and you can buy yourself a car!
Rehabbing homes can be very lucrative. Just make sure that you keep yourself knowledgeable and well versed about the basic do’s and don’ts of the industry and then you can make a good fortune.

By: John Daniel Mc Grey

About the Author:
For more tips on rehabbing properties and on real estate in general, go to http://www.rehab-real-estate.com.

If you are adept at doing handyman and Do-It-Yourself (DIY) jobs, then you would surely enjoy fixing and flipping properties for profit. In real estate, rehabbing basically refers to the process of renovating a fixer upper home before selling it at a higher price.

To become a successful rehabber of properties, you should remember this simple principle: all the upgrades and renovations you will put on the property must raise its market value. Therefore, you have to make sure that you won’t do unnecessary things that will make the property lose its curb appeal.

When rehabbing houses, you need a considerable amount of investment capital to start a project. However, there are many ways to improve a property’s looks and make a good impression on the buyers without having the need to spend a lot of money. Listed below are some of them:

Make your mailbox stand out. Most neighborhoods have the same mailboxes but if you replace yours with something hip and trendy, you will make the property look unique. Mailboxes don’t usually cost much and you can buy one for only about $35. If the previous letterbox is still in good condition, however, you can paint it with a nice color. If the property has a front yard, make sure that the lawn is well maintained and there no weeds creeping on the sidewalks or the walkway. Planting flowers with different colors near the front door will also give the house a warm and inviting look. Giving the doors a new look will also boost your rehabbing project’s curb appeal. Replace old wooden doors with new ones or if they are still usable, you can repaint them and replace the handles or the knobs instead. Also, don’t forget to spruce up the front door by adding a knocker or a wreath. Cleaning up the windows is a great way to improve a property’s looks without spending a lot of money. You can use water and cleaning detergent to remove dirt and dust that have accumulated on them. Placing shower curtains on bathrooms can also add flair to the property’s interior. For about $40, you can improve a bathroom’s looks with a new rod and a nice curtain. Instead of installing new kitchen cabinets, you might want to cover them with glossy paint. However, you have to make sure that they are still in good condition.

By: Daniel G. Mc Grey

About the Author:
If you want to know more tips on how to save money when rehabbing houses, visit www.REIWired.com.

The term flipping seems to be everywhere nowadays, including in the titles of a number of television shows that have attracted loyal followings. That means lots of people are interested in buying houses and reselling them at a profit. That’s the good news. The bad news is that there’s considerably more competition for fixer-upper homes than there was before the concept became so popular among television viewers.

But that doesn’t mean there isn’t still a significant amount of money to be made buying and reselling homes. Here are three tried-and-true ways to succeed at becoming a successful home flipper.

Fixing and Flipping Houses

The first one is the most popular, and the concept is quite simple (at least on the surface): you find a home that’s in need of repair or upgrading, you go in and do whatever work is necessary, and then you put the home on the retail market. Depending upon where you live, how hot your market is, and how good of a bargain hunter you are, you can sometimes make $25,000 (or much more) on a single transaction.

There are some dangers involved in that strategy, of course, including paying too much for the property in the first place and then in underestimating how much the repairs or upgrades will cost. In fact, the latter situation provides one of the most common points of tension in the various television shows devoted to flipping houses, so it’s best to have a solid knowledge of home prices and repair costs before you attempt any flipping method.

Fix, Hold, and Sell Later

A second method that works well is to buy a rundown house, do whatever it takes to bring the property up to standard, and then to rent the home on a lease-option basis. There are some advantages to this method. First, you can get a potential buyer into your home without having to pay a real estate fee. Second, you’ll be getting a renter who genuinely wants to buy the home at the end of the lease, so they’ll take better care of the property. Finally, there may be some tax advantages to you if it takes more than a year for the lease option period to expire. Check with your tax advisor for more details on that.

Flipping Houses

A third method requires a greater knowledge of home prices and repair/upgrade costs, but it can make you a considerable amount of money without having to do any repairs yourself. That method involves finding properties and reselling them to other investors on an as-is basis. You won’t make as much money per transaction, since you’ll have to sell at a below-market price to the next investor, but depending upon your market and how good you are at finding bargains, you can flip those properties faster, since you won’t be doing any repairs or upgrades before you turn around and resell them.

Fixing and reselling homes has been an investment strategy for centuries, and will continue to be a popular investment option as long as folks still live in houses. You can get your piece of that pie if you shop hard, estimate carefully, and know your market!

Copyright ? 2006 Jeanette J. Fisher

By: Jeanette Joy Fisher

About the Author:
Jeanette Fisher helps beginning real estate investors with five easy steps to make money in real estate. http://www.doghousetodollhousefordollars.com Free ebooks, teleseminars and Free Real Estate Investing Information

By now you’re probably convinced that rehabbing houses is a very lucrative business, especially amid the recession. You need to buy a cheap property, make repairs to raise its value, and then sell it for a higher price. Sounds easy, right? But before you flip and fix houses, make sure you read this checklist fir rehabbers first.

Do you have love for repairs and house maintenance? This should be no problem for handymen, or people who love doing odd jobs on their own. If you have the knack for fixing clogged sinks, busted door knobs, leaking roofs, and other household repairs, then welcome to the world of rehabbers. If you have the knowledge and skills, then you can actually flip and fix a house by yourself or with very minimal help from other people. You will save on labor costs if you’re a handyman. This style, however, is time-consuming and tedious since you will do all the work yourself.

If you have zero handyman experience, it’s not the end of the world for you. One thing you can do is hire contractors. This is a costlier, of course, but is better than not being able to flip and fix homes at all. The good side with hiring workers is that the project will be completed faster.

Aside from having the handyman spirit, you must also have knowledge on the area where you will fix and flip homes. This is helpful, especially when estimating the value of the property before and after you rehab it. This will also help choosing what properties to buy and when planning what repairs and renovations you will do with the houses. For example, you must know the number of rooms prospective buyers in that area are looking for. It will be better if you knew where future development projects like schools, hospitals, and shopping stores will be built.

You must have the nose for the good deals. This is simply learning when to say “Yes” and when to pass. There are scores of fixer upper homes and other cheap properties in the market today. To say that you will run out of properties to flip and fix is outright exaggerated if not crazy. Rehabbers whose noses for good deals are clogged by this fear will always buy properties even when they get the bad end of the transaction. You must learn to pass what you think will not lead to positive returns.

By: Daniel D.C. Mc Grey

About the Author:
Learn how to do this and more at rehab-real-estate.com. Watch videos and read articles and learn how to flip and fix properties for profits.

There is no debate on the potential of rehabbing houses to make you a millionaire. Successful real estate investors who now work a few hours a week and buy what they want are a living testament to this. A lot of people tend to ask them whether they are fit for the job. “If they made it,” why can’t I?” they ask. Those people became successful because they had some unique qualities. Here’s a little checklist of what you must have to make it big in this business.

- An appreciation for the ugly. When you look at a home, do you see it from the eyes of an investor? In rehabbing, you will be dealing with distressed properties. Some home have been neglected for years. Others need repairs because its previous owner struggled financially. Whatever the case, these ugly ducklings are your ticket to riches. With proper improvement and repairs, you can turn them into a “swan.” Just to keep the fairy tale and fable analogy make that a swan that lays golden eggs! Treat fixer upper homes and other dilapidated properties as if they are a treasure chest waiting to be opened.

- If you appreciate the ugly, you must never like the bad. Some homes are simply not worth fixing. These properties that are just waiting for Judgment Day. Say “no” to properties that require major repairs. Repairs like total roof replacement can cost a fortune. Structural repairs, or those having to do with the house’s main structure, are a major headache. Watch out for those huge cracks on the wall. They are a warning sign.

- Get the good. Say “yes” to properties that need only some retouching or cosmetic repairs. If the house needs new lighting fixtures, bathroom fixtures, and a fresh coat of paint, that’s a good one. These repairs are cheaper but can raise a house’s value significantly. Tip: replace the carpeting no matter what. Experts also recommend an overhaul of the front yard. Make sure that you trim the lawn before you place a “for sale” sign on the yard. If the grass is tall enough to become a snake den, which means the property has been neglected. That also means “all efforts wasted” for you as a rehabber.

By: Jesssica Anderson

About the Author:
To learn more about rehabbing houses, simply go to rehab-real-estate.com. The website contains very informative articles and videos that will surely help those who are starting in the business of rehabbing houses.