TV star reveals home-flipping secrets

By Robert J. Bruss
Distributed by Inman News
July 17, 2007

If you have been fascinated by reports about how to earn profits fixing up and quickly selling houses for large profits "Flipping Confidential" by Kirsten Kemp reveals how she profitably flips houses. As TV host of The Learning Channel's "Property Ladder," Kemp has become an expert at how to recognize houses with profit potential and those to avoid.

She explains how to earn the first profit at the "buy," meaning when the house is purchased. Then she emphasizes techniques for upgrading houses with cosmetic improvements that add more market value than they cost. Lastly, Kemp shows how to quickly resell the house, even in a slow buyer's market, by "staging" the home so buyers won't have to use their imaginations to see how attractive the home can be.

Dozens of before-and-after photos add to the easy understandability of this book. Written in a practical manner, with lots of good and bad examples from the author's personal experiences renovating houses, this guidebook shows how to create a profitable home-flipping business.

Especially useful is the emphasis on budgeting for virtually every expense and projecting net profits after resale costs, even including the capital gains taxes. Although Kemp doesn't specifically state her profit target, her goal seems to be to at least earn double the cost of improvements.

To illustrate, if she spends $25,000 for improvements, her net profit goal would be $50,000. Not bad for a few months' work.

Even if you are not interested in flipping houses but are perhaps looking to remodel your personal residence, the author's chapter about interviewing contractors is especially valuable. She lists the key questions to ask each renovation contractor and the right answers to hope you get.

Although Kemp says investors can get started with little or no cash, she recommends making at least a 20 percent cash down payment and then arranging a home equity credit line to pay for the renovations. She also explains the various mortgage types available, recommending the interest-only alternative because the holding period for most flipper houses is usually less than six months -- so mortgage amortization is not important.

While the book is strictly about flipping houses, it could have been made even more valuable to readers by including alternative flipper strategies, such as renting the fixed-up house to tenants or selling it on a lease with option to purchase, especially in a slow buyer's market.

Chapter topics include "My Story"; "Getting Started"; "Assembling Your Team"; "Building a Budget"; "Creating a Time Line"; "Improving the Property"; "Staging the Flip"; "Flip-Flops"; and "Frequently Asked Questions."

This new book is designed to overcome virtually every objection a potential home flipper might have. It anticipates and resolves issues that prospective home flippers often encounter. The book is especially valuable and believable because Kemp shares her personal experiences, along with before-and-after photos, to add realism to the topics discussed. On my scale of one to 10, this excellent book rates a solid 10.

HUD homes are a Wonderful Investment!

As an approved HUD broker, I can attest to the fact that HUD properties are a great opportunity.   These properties are purchased online, through an agent, by sealed bid.  HUD is not interested in hanging on to their homes; they price their properties to move. I had one client who purchased, then replaced the carpet, painted, and refinanced. She was able to drop the PMI off of her payment, and put money in her pocket. Not too Shabby!  Go to www.hmbireo.com to view HUD properties. Many times, a property condition report is readily available.  Of course, I have keys to HUD homes, so give me a call if you find one that interests you!

 VA homes are also a Good Deal!

Go to www.ocwen.com for more information on these properties. VA offers great financing for investors--I have seen their Vendee financing downpayment for investors as little as 5% down, with good credit and reserves.  Call me for more details.

Don't forget the Auctions!

You'll want to look into:

• Marshall & Marshall
• Williams Auctions
• Realtybid.com

Buyer Beware:

I cannot emphasize enough the importance of having an inspection done.  If you are not knowledgeable about electrical, HVAC,  plumbing, roofing, and construction in general, please have a home inspection done.  It would better to spend $300-$400 and walk away from someone else's misery, than to take it on. 

The same holds true for having title work done. An Alta 98 is currently the best coverage available.

Also, get a home warranty.  Again, for $400, it will cover unexpected repairs; that is,  things that were fine at the time of the purchase.

 Confirm whether the Earnest Money is refundable under certain conditions.  For example, HUD homes can be sweet deals, however, for Investors, the Earnest Money is non-refundable, regardless of the reason why. So you better have finanicng in order, and I suggest checking out the property, prior to making an offer.

Hard Money Lenders:  Many Investors swear by them; and many are also cursing when they hear one mentioned. Please be fully aware of the Lending Terms.  The idea is to invest for success-Yours!

Investing in Foreclosures

A foreclosure occurs when a borrower defaults on a mortgage loan. As the process begins, the lender often gives the borrower ample time to repay the back due portion of the loan. However, when the borrower doesn't repay, the lender takes possession of the home. The borrower must then vacate it as they have given up all their interest in the property. Since foreclosures can often be purchased by another individual at a much lower price, investing in them can be very beneficial.

How Do You Find Foreclosures?

One method of finding foreclosures is to search for the lenders that hold the defaulted mortgages or lenders that have begun foreclosure proceedings. This can be accomplished by visiting the county recorder. These documents are part of the public record and you'll find that in most states, the recorded document will be a Notice of Default or a Lis Pendens. If the state is a non-judicial state, they will record the Notice of Default. Judicial states will use the Lis Pendens. Since the Lis Pendens is a court record, you'll instead search the records of the court.

Many county records have these available online. If they're not available, you'll need to go your county's recorder's office to do your search. While this may be a time- consuming job, investigating the lenders who've recently begun foreclosure proceedings or have recorded the defaulted mortgage is often a very profitable task. It's also the least expensive way to handle your investigation.

It's Wise to Have an Inspection Done

Although the lenders who hold the defaulted property will often discourage inspections, it's highly recommended that you investigate the condition of the property before purchasing. Many lenders won't accept any contingencies on a purchase and sale agreement for a foreclosed property. If this is the case on a foreclosed property you wish to purchase, try to have them allow you to do your inspections before you place an offer on the property. While you do run the risk of losing the property to another investor by taking the time to do your inspections, it will allow you to know whether it is a sound investment or not.

Avoid Properties with Structural Issues

Once you've found potential foreclosures, you'll want to figure out how these particular properties would be a good investment. If during your inspections you find structural repairs are needed, proceed with caution. Often, the cost of a structural rehab makes the property a non-profit investment for you. On the other hand, if the property simply needs cosmetic fixes, it will most likely be a wise investment.

Investing in foreclosures does take thorough research and some knowledge of the cost of rehabilitating a property. However, with this time and effort, you'll find the results to be worthwhile and profitable.