Detroit Real Estate

I see a lot of homes with investors and sometimes I think I know how to buy investment homes.  But let me tell sometimes I get in over my head.   To be an investor that wants to flip homes you really need to know how to estimate the total costs.

Let me give you an recent example.  I took one investor to see this Livonia foreclosure.  He thought it was too much work and didn't want anything to do with the house.  I myself have been thinking of doing a few flips and I "thought" this would be a good home to flip.  I thought it was a no brainer.  I just thought this home could be a profitable flip.

So I called another investor to take a look at it and see if it was worth while.  The 1500 square foot house was only listed at $35,000.  I thought we could get between $115,000 to $125,000 for the Livonia foreclosure after we fixed it up.  Now isn't that a no brainer.  How can you spend $80,000 to fix up a house?  At least that's what I thought.

It would have cost over $50,000 to repair the house on the light side.  Then you would have had to add in the carrying costs.

You have to figure in:

• electrical and gas bills while repairing the home
• taxes for the 3 or 4 months while rehabbing the home (remember the taxes will be higher because it will be non-homsteaded taxes because you don't live in the property as your principal residence
• costs of cutting the grass during the summer
• Michigan transfer taxes (taxes you pay when you sell the home)
• Homeowners title policy when you close the home
• Real estate commission
• if you are borrowing the money you have to figure in the interest on the money you borrowed
• Permits

But the biggest cost you have to figure is the time.  Could you have done two houses in the time you spent on this one house.  Are you tying up your money and time in a home that you could be doing better else where.  Well to make a long story short.  So the other investor came over and told me I was crazy because it was way too much work.  They told me to find an easier Livonia foreclosure to flip.

I have helped many investors find profitable flips but even I would have messed up on this one.  But I took the advice of others.  You should get a second opinion sometimes if you are unsure.

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