By Joe Palumbo III
A property is generally “flipped,” bought and resold, in six to nine months. When purchasing a property for investment, you should look for a property below market value for the area in which it is located to give yourself a margin for real profit.The first cost is the down payment on the property itself. Good credit is a huge factor, unless you plan on paying cash. I don't normally encourage this with investors who have good credit. I think it's better to use banks. Down payments are generally in the 20 percent range, but with good credit you should put down no more than 10 percent, in some cases less. Closing costs are next and are about $18,000. Renovation costs average $15,000 to $40,000 depending on the property's condition. If this cost is high, the sale price will be lower.A year's worth of mortgage payments should be set aside as a safety buffer. This is also key if you want to rent because if you lose a tenant, you still have enough to make payments. Tenants make the property that much more marketable and lucrative come resale time, because there is income already coming in. Finally, set aside funds for miscellaneous and unforeseen problems like general upkeep, damages to the property, and various attorney and broker fees that may arise.So how's business with “flipping” properties? It can be very profitable, as I have watched clients make $20,000 plus per deal when following a structured plan.You don't need all the money in the world to be a player in this arena. A solid business model and some capital is all that is needed.Joseph J. Palumbo III is the managing director for the Palco Group Inc. The Palco Group deals in asset management, private finance funding, and business consulting. Palumbo can be reached at palcogroup@aol.com or 718-461-8317, 516-297-4034.
