Flipping properties is an easy way to make some quick cash. Getting a rundown house and making some basic repairs before you flip it is the general way it is done. But sometimes this process runs into trouble.
If the person you are selling to needs to get a loan, then the quick fix flip might not work. This is because lenders need to see the appraisers report. If the appraiser gives the property anything below an “Average” rating, then the lender will stipulate the repairs that need to be done. In this instance your profit margin shrinks as you have to make repairs and sell at the previously agreed price.
For example, if you buy a really rundown (but not condemned) house for $70,000 and do some basic repairs for about $3,000 so that your total cost is 73,000. If you find a buyer to take it off your hands “as is” for about 110,000 then you make a decent profit of $37,000. However, if the appraiser gives you a “poor” rating you will need to do the all the repairs that he says are needed to get to the “average” rating. Now if these repairs cost you $20,000, then your profit drops down to only $17,000.
A better way to go about it in the previous example would have been to do all the repairs necessary before finding a buyer. In that case the $93,000 house could have been easily sold at $150,000 giving you a $57,000 profit. The point here is to avoid being cornered to sell at a lower price. Go the extra distance and do what it takes to add value to the property. This practice will always serve you well.