Flipping Commercial Real Estate

Home-themed TV shows make it sound easy: buy a house, update it, quickly resell it, and bank the profit. But look behind the scenes of flipping commercial real estate and you may discover that this simple process requires (some) money, careful budgeting, strategic planning, and a certain amount of luck and skill.

Flipping basics

Flipping commercial real estate means investing in a residential or commercial property, updating that property (somewhat), and selling it. You should aim to make a net profit of 10% - that is, selling it for a price 10% to 25% higher than the original purchase price, including all related expenses. Flip + Sell + Reinvest.

Where and how to start

The process of flipping a house can seem pretty basic but there are important steps to take at each point of that process:

• Education: Education is your first property flipping step. Use the Internet, library, community college and seminars to learn all you can about property flipping and buying properties with little-to-no money down.
• Target property: Determine what type of first property you want to flip. Are you interested in homes that are new construction, fixer-uppers,or commercial properties? Focus your studies to that property choice.
• Credit: Check your credit score through the three free services. You need to know where you stand credit-wise before you begin applying for mortgage loans.
• Not having a budget may be your first step toward failure. Your property choice will influence the amount of loan you may qualify for. How much of a cash down payment will you make?

How much will it take to get the house up to code, habitable, and sufficiently presentable? Budget for repairs and materials, contractor services, permits and inspections. One blogger suggests planning to add 20% to your estimate for the final cost of a fixer-upper.

Your budget should also include the property price and the closing costs, any HOA fees, realtor and legal fees, inspection fees, mortgage, insurance, taxes, etc.

What to fix?

A new construction flip should require very little in repairs or updates. Fixer-uppers are different. You are not selling the fixer-upper "as is"; you are planning to rehabilitate it for better value.

• Structural: Budget for issues such as plumbing, electrical updates, and structural restoration.
• Best updates: Buyers want decent bathrooms and kitchens free of plumbing and mold problems. Don't kit your fixer-upper with a chef's kitchen and master suite spa. Do the important basics and make both areas look fresh and clean - and safe!
• Curb appeal: The exterior may require some refreshing to both the structure and the landscape. Again, do the important safety and refresh basics.

Continue your education

Learn with each step and each property flip. With a solid knowledge base and flip plan, you may find yourself becoming an experienced and skillful commercial real estate flipper sooner than you think. Remember - your success is in flipping that first property for a profit, reinvesting, and repeating the process. Best wishes for your success.