Reality TV shows have inspired people to flip houses for profit. They make it look fun, easy and the type of business anyone with some capital can get into. Of course, every once in a while, house-flipping episodes show an underperforming sale and a financial loss. Clearly, people in the flipping business need a cushion in case things don’t pan out. That’s why some speculators start out flipping land. Yes, that’s right, land.
Flipping Land Can Be Less Risky Than Homes
Rough land can be far less expensive to invest in that blighted homes. There are also fewer unknowns in terms of flipping. Investors won’t need to worry about replacing an electric box, mold behind walls or failing a building inspection. Land flippers can also start with a modest out-of-pocket investment and work their way up to short-term lending to finance endeavors.
There are a few things to keep in mind when selecting a parcel. Property that abuts a street with sewer and water are preferable to scrubland in areas without services. It is not uncommon to run into difficulty drilling an artesian well or getting a permit for a septic system. Developers know this and will jump at street-ready parcels first.
Make certain the parcel qualifies as a buildable lot with the town or city. Then, either hire an excavation team or clear the brush and trees yourself. The goal will be to create an open area where a home can be built while leaving suitable greenery. Call a real estate agent and list the property. Quick land turnovers can earn several thousand dollars in profit with minimal effort. Remember to factor in hidden costs such as taxes, interest, and recoding fees among others.
Upping The Ante To Spec Homes
After gaining experience in the land flipping business, take that knowledge and apply it to homes. But rather than scoop up a dilapidated structure, employ that land development acumen and take the next step. Select a parcel that is in a prime residential location. It’s sometimes surprising to find a wooded lot at the end of a neighborhood that can be developed.
Work closely with a real estate agent to understand the types of homes that are trending and the average sale prices. With that information in hand, come to an agreement with a general contractor who can oversee the spec house project. Decide on a design and calculates the total costs. Then, add 15 percent for overruns. Take that number to the bank for a building loan and put the team to work.
Spec home projects can be listed with real estate agents even before the first nail is driven into a 2X4. A savvy real estate agent can get a property up online with design information, an artful rendition of the finished home and key selling points. In a perfect world, a new home buyer may be found before construction begins.
The basic point is that it doesn’t require significant wealth to get into the home industry. By starting with modest, low-risk land deals and working up to spec homes, a solid living can be earned in the real estate industry.
