The first quarter of 2015 showed an average gross profit of over $72,000 on house “flips,” and if you’re like most people with an entrepreneurial spirit, you might be thinking of cashing in on something like this. However, it’s important for you to know that house flipping is more complicated than just buying and selling a home – and reality TV shows don’t really depict the process accurately.

Should You Buy and Flip Houses in Middle Tennessee?

If you’re thinking about buying a home in Middle Tennessee so you can fix it up and sell it quickly, ask yourself:

• Where are you planning on buying and flipping property? Purchasing a house at the top of the price range in an upscale neighborhood means you are relying on that area’s property values to increase, not remain stagnant.
• What trends do the experts say are going to affect the future of the real estate market? When the market is good, experienced house flippers see money growing on trees. When the market drops, those same trees can be quite bare.
• What’s your game plan? Some house flippers like to a purchase a fixer-upper for a cheap price, make repairs and then sell it. You’ll need a timeline and a budget so you can ensure you don’t get in over your head.

Potential Drawbacks to Flipping Houses in Tennessee

Even a perfect plan can go wrong—budgeting flaws, timing problems, a sudden increase in neighborhood crime—leaving you with a house that won’t sell.

If you’re thinking about diving into the market, know that:

• Your expenses could exceed your returns. Unforeseen costs, taxes and other fees can add up quickly. Remember, the longer it takes to flip a house, the more money you stand to lose.
• You may have to pay capital gains taxes on your earnings.
  
• The real estate market fluctuates. If your three-month remodel turns into a thirteen-month overhaul, a home you expected to sell for $480,000 might only sell for $400,000.

Advantages to Flipping Houses in Tennessee

Aside from the pleasure of improving a property, you might enjoy these added benefits:

• You can profit without financial contributions. If you partner with investors and provide the sweat equity, you might not need to contribute any of your own money.
• House-flipping can be an excellent short-term investment. The average return on investment for house flips in the first part of 2015 was 35.1 percent.
• You can maximize your return with the right people on your team. If you work with a good Realtor®, you can find properties that need a little work priced much lower than other homes nearby. In many cases, you’ll be able to list and sell these homes for a tidy profit—even if property values remain flat.

What Kind of Home Are You Looking For?

Let’s talk about how I can help you find the right home for your needs. Call me at 615-473-5973 or get in touch with me online. I’ll start looking for properties that match your criteria right away.

Lenders determine whether you can afford mortgage payments by evaluating your credit risk and overall financial condition. Generally, they’ll want to make sure that your debt-to-income ratio is low enough that you can afford to repay them.

How to Determine Your Debt-to-Income Ratio

Mortgage lenders want to know that no more than 28 percent of your income will go toward repayment of your loan. Simply multiply your gross monthly salary by 0.28 to figure out how much house you can afford.

You can determine your own debt-to-income ratio by adding up all of your monthly obligations (including your current mortgage or rent payments) and dividing that number by your gross monthly income.

If you pay $1,000 for a mortgage, $500 in bills and $500 in other expenses, your monthly obligations are $2,000. Assuming your gross monthly income is $6,000 (remember, that’s before taxes), then you’ll divide 2,000 by 6,000.

In this case, your debt-to-income ratio is 33 percent.

How Lenders Assess Your Creditworthiness

For the most part, lending institutions use the 5 Cs to assess your creditworthiness. They take into account:

• Credit history. Have you always paid your bills on time? Have you ever defaulted on a loan or declared bankruptcy? These and other factors provide lenders with your credit score, which shows how fiscally responsible you have been in the past. All legitimate lenders will check your credit rating before considering your application.
• Capacity. Based on your employment history and past levels of income, lenders can get an idea of your ability to repay a large loan. Underwriters use your debt-to-income ratio to evaluate your credit risk and determine whether you have the capacity to pay back a mortgage loan.
• Collateral. When you purchase a home, it’s through a secured loan – and the collateral is your home. If you fail to make payments on your loan, the home becomes the lender’s property.
• Capital. Mortgage lenders view capital as anything you could rely on to make payments if you experienced a sudden loss of income. Your capital consists of investments, savings accounts, retirement accounts and other assets that you can quickly liquidate.
• Conditions. Conditions of a loan involve how you intend to spend the money you receive from a loan. In the case of a mortgage loan, lenders will want to ensure you are purchasing a home by talking to your Realtor® and possibly inspecting the home.

Ready to Explore Middle Tennessee Homes in Your Price Range?

Call me at 615-473-5973 or send me a note online. I’ll be happy to build a custom search based on your needs and help you find the perfect home for sale in Williamson County.

If you’re that rare seller who wants to put his or her home on the market without actually selling it, this one’s for you.

Follow these five sure-fire tips to let your home sit on the market for weeks and you’ll be watching those weeks stretch into months in no time. In fact, you probably won’t need to move for years.

Don’t clean too thoroughly.

People buy houses to live in, right? Then you want yours to look lived-in! Maybe you’ll clean up the dinner dishes, vacuum and make the bed out of habit. However, you don’t need to sweat the small stuff such as washing the walls or picking up yard litter.

Repairs? Let the buyer handle them!

People love to do repairs on a newly-purchased home. Moving is dull, and fixing stuff helps break up the monotony. Who wouldn’t look forward to repairing leaky faucets and battling with a closet door that just won’t stay on its track? Many buyers will even hire a home inspector to write their to-do list for closing day.

Staging isn’t for everyone.

When your Realtor® talks about staging your home, she’s really just trying to keep you busy. She knows how easy it is to pack up all your belongings and find another place to live, and she doesn’t want you to get restless while you wait for a new home to fall into your lap.

Curb appeal… Isn’t that a TV show?

Natural is in, so overgrown lawns shouldn’t be a problem for modern homebuyers. Besides, your buyers will be living inside the house; they don’t care what the outside looks like.

Pick a price; any price.

While your Realtor knows the Middle Tennessee real estate market, you should only concern yourself with how much your home is worth to you. Let your emotions guide you when you’re setting the price for your home, and then tack on an additional $10,000 ($20,000 if you have a pool).

*If your home does sell after following these simple instructions, you can take some solace in the fact that it probably sold for much less than it might have if you hadn’t stumbled upon this handy guide.