It’s not difficult to do house flipping business in the USA as you may be thinking. You can see many people like me, for example a single woman from India with a 14 year old son realise our dreams.
Our success should assure you that you too can do it. I only had the experience of building my own house in India.
It was in Denver, Colorado I met a Gujarati businessman Kumar. He told me he had made $600,000 in 6 years.
I was curious to know what he was doing. He said he would buy fix up homes and decorate them after renovation and sell them.
I thought perhaps it was too much for a woman like me to do it.
But I started looking into newspaper classified ads and was attracted to a studio bungalow under fix up homes for sale for just $15,000.
You can also do what I did with this house. Fixed it up with the help of a Mexican tenant and my son and sold it to make a cool profit of $10000.
A plumber who was sent by a neighbour helped me to repair water pipes.
The house had just a living room with a kitchen and bathroom, in Elmira St. I added a bedroom by dividing the hall into two to get a better price.
Do you want to take up a fix up house and flip it like I did?
Not a lot of tax hassles as I did not even own it.
Read on if you want to know how to do a similar house flip deal to earn $30000 within 6 months like I did.
I went to look at it and knew I could do it. I think it measured 30 ft by 30 ft or even less. But was surrounded by beautiful lawn.
I could imagine how it would look when it was finished and how much I could sell it for.
Next step was to call the listing agent and I told them I would fix it up and sell it. But I didn’t want to buy it.
I went one step ahead of Kumar and signed for a flip deal. I would give them $5000 and they would give me the key to do the rest. They agreed.
So we signed an agreement and I got the keys. The house had been boarded up for a long time. So they were happy to get something.
You can do the same.
Find a good fix up home in a good location and have a chat with the real estate agents who is listing it for sale.
You will see their sign board in front of the house for sale if you see a boarded up house.
Tips for How to Start Profitable House Flipping Business
Be careful to find a good location with a flourishing neighborhood and well kept lawns etc like I found this little house on the prairie.
If you see too many boarded up abandoned houses around usually repossessed by the bank if the owner failed to repay his loans, just move along.
Because nobody would want to live in a house surrounded by abandoned houses.
2. Legal Process
My landlord Richard Gross was a Jewish lawyer who graduated from Harvards and he backed me up at every step.
You must find a good lawyer to verify the facts and be with you when you deal with real estate agents as they can swallow you.
Richard did the title search etc for a reasonable price of $300.
He took care of all the legal aspects of the deal like drafting the agreement with the real estate agents.
Later he would become jealous when I made a cool $10000 selling it. He wondered why didn’t he think of it.
That is the difference between an entrepreneur and an ordinary mind which could not see the opportunity.
Be smart and grab the opportunity when you see a house in a good locality and try to visualise how it would look when it’s fixed up and what it could fetch you.
3. The Profit Margin in House Flipping
The house was priced at a mere $15000 but was very attractive with a lawn around it.
I could easily see that the house would sell for double the price if it was made liveable.
Take a good look at the house of your choice twice to make sure there are no major problems that could deter you from finishing the project and putting it on the market.
Don’t forget to make background checks on the agents and the owner.
They could together cheat you like it happened in the Andesha case which I will explain later.
4. The House Fix Up Process
So how did I fix it up stage by stage within a short time of a month or two?
We drove up there one Sunday with a Mexican tenant. He had rented a room from me in my HMO and was looking for a job.
My 15 year old son could drive only in my presence but he was proud to do it.
We carried some tools we had.
We started by taking off the boards that covered the windows put up to avoid squatters.
People who are homeless get into an abandoned home and refuse to leave. They are called squatters.
I looked around the big living room and thought of dividing it into a bedroom and a hall. Which worked out fine. It was just a matter of buying a piece or two of drywall which is like a readymade wall.
We also put up a door and ran some electrical wires and fittings through the drywall which is very easy to work upon. Outside walls were strong made of stucco. Means wired mesh with cement.
We took off the old carpets and threw them into the containers kept outside.
Not a big problem to dispose off the waste in USA. We find big containers placed everywhere, especially in the conservancy at the back of the house where we used to park our car and get to work on the weekend when my son could help.
My son was a great kid when he was young but I never took advantage of him. I paid him $5 an hour same as I would pay the Mexican which was the minimum wages in those days in 93/94. He also got his own bank account where I deposited $2000 as a gift when I sold the house.
The biggest problem this house had was that it had no water connection.
I asked the neighbour but he had no clue. Our guys started digging in front of the house to check the pipes. This brought the inspector from the City who was watching us to come in and have a chat.
He offered to connect water and I could pay in instalments every month along with my water bill. It worked out fine with a new connection. I was surprised to find a chamber cover made in India.
Small payments were not too heavy which the buyer of the house carried on paying.
Don’t be discouraged by seemingly big problems as they will have a solution always. You just have to have the courage to wait for it.
We started painting the house after we fixed the windows with glasses. Home depot was nearby and they were very helpful with ideas.
Then came the new carpets and electrical connections.
I got a fridge and a stove I found in the classified ads for a reasonable price. A plumber who came in to fix up the broken pipes inside taught us a lot about welding etc.
Does it sound difficult to you?
A sofa or two in the living room and a cot with a mattress in the bedroom was all the house needed for furnishings.
Some pots and pans in the kitchen and a television was set up in the living room which cost under $50.
Now it had started looking like a home and I got a black guy with his girlfriend to rent it until it was sold. Money started coming in.
I usually got my tenants by placing classified ads.
5. Selling the Fixed up Home
When you want to sell the house after fixing it up,just look around if there is anyone who is interested in buying it.
Next step is to place an ad for selling the house as well put up a sign to sell it in front of the house.
I was lucky when a red Indian guy answered my ad and came to see the house. I had priced it for $30000 after spending a mere $5000 or less on fixing up the house.
I got it’s valuation made as per the bank requirements.
The buyer refused to wear glasses even though his eyesight was very poor. Their customs did not allow him. So he sought my help to get him a loan.
I took him to a nearby bank and filled up the forms for him. Things are not at all complicated like India and so it was granted pretty easy within a month.
I even offered him a tenant if he just wanted an income from the house or I would take the existing tenant to my home where I had rented seven rooms.
So the house was sold and I had made a cool $10000 within 6 months.
Do you think you can do it too?
Nothing is difficult if you put your mind to it.
6. Continue the House Flipping Business
After fixing up your first home, you will be more confident to take up the next project.
Now I had taken up another three bedroom house with a bomb shelter in the back garden on Clinton Road. A homeless white couple who lived in their van offered to live in this house and fix up the home.
The quality of the work of this young couple was higher than the Mexican and the house that was priced for $30000 was sold for $40000 within the next six months after I had spent less than $10000.
Sounds easy as 123? It’s exactly so. I am not exaggerating.
7. Problems you could Face in House Flipping
Expect to have problems but use them as stepping stones to your success.
You know how the water connection was solved by itself.
With the second house, I ran into problems vacating the white woman with a child but I learnt how to do the eviction myself within ten days!
My lawyer taught me about the process of filing the case myself because he was too busy.
Which was filling up a few forms and posting the eviction notice issued by the court after which the Sheriff came for help!
But there was another big problem with the location.
The white lady who came to buy the house didn’t like the house because it was in the black neighbourhood of Arora county.
She told me the black guy next door was looking at her. I thought it was funny but now I understand she was right.
Whites stayed together to protect themselves while the blacks made a ghetto and they relished in trading drugs etc rather than study and get a job.
I asked a black neighbour about the bullet hole in the window glass and he told me casually how two drug dealers were passing through the house chasing each other and shooting at each other.
Like it was an everyday matter.
Finally it was sold too in 96 and I was relieved.
I went to India for my nephew’s marriage and we moved to Norway.
Or my career would have continued just like Kumar’s who ended up as the owner of a chain of motels.
There are many Immigrants in the USA who run motels renting rooms on a day to day basis.
Sometimes rooms are rented on a monthly basis which is cheaper.
So if you are an American living there permanently, it must be easier for you.
Kumar kept an eye on his motels by looking at the CCTV connection to his home from wherever he was.
Technology makes it easier to manage businesses.
Although one of his motels caught fire and burnt down, Kumar collected a cool insurance to build a brand new one.
8. IT Returns
Most entrepreneurs are scared to think of the income tax. But it need not be so. They are people like us.
IT dept runs free courses for the public to educate them about their tax liabilities.
Hire a professional to help you if you are not sure.
I was not scared to go to the income tax office and get me a big book to read it myself and find out my tax liabilities.
I must mention I filed my own IT returns. I learnt how to do it myself through books and $600 refund in my name is still pending as I have to file the next year’s return to get it.
I should have hired a tax expert to save that money but then I would have to pay him anyway.
I don’t intend to return to the USA and so I would leave my refund to the govt as a gift for making things so easy.
Building my own home in India had no doubt gave me the benefit of knowledge.
I had built my home from scratch without using a contractor.
My brother-in-law who made the plan was a civil engineer. He came to supervise from time to time without asking for a fee.
I still gave his family some nice gifts.
But he did not expect me to pay him and they provided nice dinners whenever we visited although I had a divorce from his brother long ago when I went abroad.
Such humanity is rare to find these days.
Be sure you will find help in whatever ventures you do.
Just find the guts to ask for it.
10. Opportunities in House Flipping Business
Marketing opportunities are plenty in every town in the USA as there are always fix up homes available.
Look up online on any real estate websites.
There are many underpriced below market price homes available in every county.
Set up your own office and website if you find this idea paying well so people will come to you asking you to fix up their homes when they can’t do it themselves.
You could also get financial help if you can show your business place and IT returns as a sole proprietor or a partnership company etc.Later you could turn it into a company with no personal liability.
11. House Flipping Pitfalls
I prefer to look at the local newspapers to find the best deals. But go to see them as many times till you are sure it is something that you can work upon to make a high margin of profits.
Go to see the location etc and don’t fall into pitfalls like I did.
Legally speaking, a flip deal is not implicating you to pay registration charges etc. Unless you want to open your own office which is not required if you want to go as a sole proprietor like I did.
So you save a lot of money since only the original owner pays taxes. Isn’t it beautiful?
It’s catching up everywhere. Unless you are obsessed with owning properties, you can just flip the deal and still make good money.
13. Warning about Risks
Be careful about who you’re dealing with and don’t trust them without making background checks.
Watch out for the real estate sharks who may not be as honest and straightforward as the listing agents I came across.
An example of what happened to my neighbour of the house in Elmira St should warn you about what I am talking about.
This poor white guy lost his home when he fell into the traps of a real estate shark named from Afghanistan whom I introduced unfortunately.
He proposed to give me $10000 as commission if I found him a buyer to the motel he was selling. Which he refused to pay even after I found him a buyer. But I recorded his phone conversations when he was refusing to pay saying nothing was in writing.
I took him to court and produced the phone recording as evidence.
The judge accepted it although it is not allowed to tape a conversation but it was a rare case with no other evidence.
The huge motel was owned by an Indian guy who had even built a meditation place at a high altitude which looked beautiful surrounded by fountains etc.
The property spread on acres and cost around $700000.
Many luxurious rooms were built.
So my neighbour in Elmira was lured and he refused to take me as a partner and got it all on his own since he offered very easy terms of owner finance.
Luckily I was spared and he sacrificed his home on Elmira to make the down payment of more than $100000.
He spent a lot of his energy and money to get it going but he was not aware of the vicious plans of this Afghani agent and his friend.
One fine day, electrical connections were cut off by sabotage from the cunning and water pipes froze quickly without heating.
Finally, when the new owner got the connections working, the frozen water pipes broke because water expands when it’s frozen.
So water was pouring everywhere in the rooms like it was raining and the guy lost money heavily.
He couldn’t pay the instalments and Agent’s evil plans worked to repossess the property.
Perhaps he had done this to many people before but we were not aware of it.
So be careful to make background checks about the real estate deals or you could end up losing your shirt like this guy did in the hands of some bad guy.
Good luck with your fix up projects and please let me know if my narrative helped you to become confident to start your own house flipping business.