Flipping homes is one of the best ways to earn substantial profits in the real estate business without owning a property for an extended period of time. Although it does take hard work and research, you don't need to be a real estate expert to make money flipping houses. Anyone willing to work can make additional income, even if they're currently working a nine-to-five job.
With over 8.5 million units of housing and a median property value of $449,826, New York is an excellent state for house flippers. However, you must have a solid strategy and a solid understanding of the local housing market to be successful.
So, to help you prepare, here is a look at how to flip houses in New York.
Flipping houses is a real estate investing strategy that involves purchasing a distressed property, putting money into renovations, then selling it at a higher price. If you learn to analyze deals well and crunch the numbers, you can often take home a substantial profit, even after putting money into the purchase and repairs.
Unlike wholesaling, flipping houses requires you to purchase and own a property while the repairs are being made and you're marketing the property to buyers. Although, unlike buying a rental property, your responsibilities stop once the home sells, and you can walk away with a handsome profit.
With a population of over 19,677,151 and a median household income of $75,157, The Empire State has a huge market for homeowners.
This is one of highest figures in the country and more than double the national average profit per flip of $67,900.
The average time to flip a house in New York is just 172 days, which means that in less than six months, you can earn more than many people make in a year's salary just by flipping houses in New York.
Now that you know a little more about what house flipping is and some insight into New York’s market, let’s go over 7 easy steps of how to flip a house in New York:
Before you start flipping houses in New York, you should consider finding a mentor to show you the ropes. Although you don't have to be a real estate expert to make money flipping houses, it does take time to learn the strategies and identify good deals.
The New York real estate market can get very complex, and if you're new to investing, you should seriously consider finding a mentor. Unlike wholesaling houses, you'll purchase the property and take on the associated risk.
So, if the deal falls through, you could lose your entire investment or destroy your credit if you can't repay the loan. Finding a mentor will help you avoid costly mistakes that might turn you away from real estate investing forever. Even if you have to split the profits or pay for a coach, it's better than getting in over your head.
You must study the local market carefully and learn what makes a solid deal to be a great house flipper. Study things like population and demographic data, school districts, zoning laws, housing prices, and anything else that may impact the conditions of the market. It's also helpful to network with other investors and learn their tips and strategies for finding the right property.
The best place to meet other investors and learn their techniques is to attend local investor meetups or become a local chapter of the National Association of Realtors.
Here are some of the top real estate investors' associations in New York:
The New York Board of Real Estate governs real estate practice in New York State. They are also a good resource for learning the laws that impact real estate agents, investors, and home buyers. You can read up on the laws and licensing requirements created by REBNY here.
Once you feel confident in understanding the local housing market, you'll want to learn how to analyze deals and find properties that would make a good flip. Just because a property is offered at a cheap price doesn't mean it's a good deal, so you'll need to learn a few formulas to help you analyze opportunities, including:
It's also essential to develop a strategy for finding deals, such as searching property records, networking with wholesalers, or doing direct mail advertisements.
Once you feel confident in your abilities to find a deal, you'll need to get access to capital. Unless you plan on paying cash, you'll need someone to finance your deal. A traditional mortgage is not recommended for fix-and-flips because they typically offer higher interest rates for investment properties and prepayment penalties that will reduce your profits. So you'll need to look at other forms of financing, such as:
Once you've identified a suitable deal and secured the financing, it's time to close on the sale. New York is an attorney state, meaning a bar-certified lawyer must be present at the closing to draft all the legal documents and transfer the title. So, if you still need representation, start looking for a good lawyer.
The closing process in New York is fairly standard and usually takes about 60 to 90 days. First, you'll arrange for the earnest money deposit to be put in escrow and then conduct a home inspection. You'll complete a title search and pay for insurance to protect you from errors or mishaps.
You'll then finalize the loan application process and schedule an appraisal if necessary. Finally, you'll conduct a final walkthrough and work with your attorney and real estate agent to finalize the necessary documents and pay the outstanding closing costs.
Once the home is in your name, you can begin the renovation. It's best to hire a contractor and crew before the actual closing so they can get started on renovations as soon as you close on the same. The longer you hold the property, the more it will cost you in the long run. So it's best to draft a rough construction schedule before you even close on the property.
The exact schedule and cost of repairs will depend entirely on the condition of the home and the local market, but most homeowners pay attention to things like floors, kitchens, bathrooms, paint, and other cosmetic features. So if these areas need work, you'll want to focus your attention there.
The best thing to do is check market comps and consult your contractor. It also never hurts to get a second opinion and even set up a system of checks and balances to ensure you don't go over budget or get overcharged for certain upgrades or materials.
Read Also: How To Choose The Best General Contractor?
You should consider marketing the property as you finish the construction. In most cases, you'll sell to a retail buyer looking for a home as a primary residence. Although, you may also consider selling to an investor who will rent the home to tenants if there is a solid rental market in the area. You may want to hire a real estate agent to help you find buyers.
Even though you'll have to pay a commission, they can sell the home faster and at a higher sale price, which will offset the additional cost. When you've found an interested buyer, the final step is to get through the inspection.
If it comes back positive, you're in the home stretch, but if it reveals something unexpected, you must return to the drawing board and complete the construction. Once the home's condition has been approved, you'll complete the closing process again and hopefully walk away with a handsome profit.
You can use many different methods to find houses to flip in New York. You could find someone with access to the MLS and look for foreclosures or pre-foreclosures. You could attend property auctions and bid on homes or network with real estate agents and other investors. You can check public records and look for notices of sale, lis pendens, and notices of default.
You could send direct mailers to homes in foreclosure or pre-foreclosure or simply drive around your neighborhood and look for abandoned homes, then knock on the door or find the owner in property records. There are countless strategies for finding foreclosures and pre-foreclosures, so you'll have to find a method that makes sense for you.
No, a license is not required to flip houses in New York.
A license is only needed if you plan to represent another party in a transaction and perform services such as negotiating, marketing the property, and fielding offers for a fee, but a license is not required if you are buying property for your own enjoyment, including investment properties.
It is possible to flip a house in New York with no money. However, you must be able to convince others of your vision. You need someone to pay the purchase price and repair costs, so one party involved in the deal must have cash. However, if you are good at spotting opportunities and marketing your vision to other investors, you don't necessarily have to provide the upfront capital.
Private money lenders are a good place for beginners to obtain funding without any cash in the bank because they can set their own requirements and may be willing to waive the standard underwriting requirements if they trust you.
If you have good credit, you can get a loan without a down payment, and many hard money lenders are laxer with underwriting requirements as long as the underlying deal is solid. So, you may have to do some extra work, but it's possible to flip a house in New York without money.
New York City tops the list of best places to flip houses in New York because of the high demand for real estate. It has a strong economy and a near-insatiable demand for housing. Plus, the median property value is $820,000, and homeowners in NYC are accustomed to paying over $1 million for a home, which means high earning potential if you can find a good deal.
However, there is a greater barrier to entry because prices are so high, and you may face stiff competition from other investors. Albany is another good place to flip houses, with a median property value of $284,433 and a strong economy supported by the state government.
Syracuse is another solid option for those on a budget with a median property value of $179,500, which has steadily increased by roughly 3% in the last year. Ultimately, any small city in New York with a stable economy and a housing market that shows consistent growth is great for home flippers.
Flipping homes in New York is a great way to earn money investing in real estate without the long-term commitment of owning a rental property.
Although it certainly isn't easy, anyone with a work ethic and patience can master the techniques and learn this exciting business. Although, before diving in, be sure to do your research and understand the risks so you don't get in over your head.
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