Page 19 - From Ghetto to Gucci: The Basic Principles of Flipping Houses

Get on the MLS and look for houses that have similar square footage and numbers of bedrooms
and bathrooms that were sold within the past six months. If you can find a house that’s finished
the way you plan on finishing it with the same number of bedrooms and bathrooms, you’ve got a
pretty good comparable. You want to look for at least three comparables so that your numbers
aren’t thrown off by one house that received a crazy high offer.

When you’re looking at these properties, be honest with yourself. What level of finish will you be
able to accomplish, compared to what’s available in pictures of the house on the MLS? Unless
you’re an interior designer, you probably won’t be able to replicate the high-end, gorgeous look
that many flippers have perfected in their remodels. You’ll be able to match it as you learn, but
your first efforts probably won’t be quite as nice as some of the more experienced flippers.

As you’re looking for the properties, you also want to look through their description in the MLS.
What are they talking about having? A property with more extensive work done will be worth
more than one that has had fewer upgrades, regardless of whether or not they look the same.

Another thing to watch out for is for bonus space. Many times there is space available in the
house that is not listed in the official finished square footage. Basements and attics can be good
examples of this—the actual square footage can double or triple the “official” square footage.

Something else to watch out for on the MLS are views associated with the house. Views are
hard to quantify, but the same house can be worth significantly more with a good view. Items
like original hardwood flooring or original decorative woodwork can also increase value more
than comps would seem to warrant.

As you’re looking through the description of the property in the MLS, you want to be on the
lookout for anything that could make this property a better or worse comp. The more you know
about what condition other houses were when they sold, the better you’ll be able to predict what
price you’ll be able to get when you’re finished flipping your house.

The comps will let you know what price you can charge for the house. Based on the three most
similar houses, calculate a price that you expect to get on the sale of your house. Be
conservative. Better to estimate low than high! Keep in mind any extras that other houses had
that your house will not, and vice versa. Use that to adjust the expected price on your flip up or
down. You’ll go through this practice in more detail in the Finance section.

Remember, the best way to make a profit is to have the most realistic view of what your house
will sell for when you’re finished! No one wants to be stuck for six months holding onto a house

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