If you leap right in to house flipping will you make big money or loose change?

How you plan a house flip makes all the difference.

There are lots of opportunities to make money on house flips in Canton, Plymouth, Northville and many more of the surrounding communities in the Detroit suburbs. We have seen our share of those who flip a house and make a grand profit, those who just make pennies, and those who lose their shirts.

•  Nights (or days if you work the night shift) and weekends off: Flipping houses is like moonlighting at another job. Part-time flippers, often called weekend warriors, can succeed as long as they are committed to treating flipping as another job.

•  Financial stability: You should be paying all of your bills on time, including the mortgage on your primary residence, before you consider taking on another financial burden. Don’t look at flipping as a way to solve your financial difficulties – you may end up digging yourself into a deeper hole.

•  Energy: Couch potatoes need not apply. You need plenty of energy to work on a home while fulfilling the responsibilities of your day job.

•  Ability to function in a crisis: Flipping a house is more complicated than it seems and always more of a challenge than it looks on TV. If you commonly feel overwhelmed already, taking on another burden may not be prudent.

•  Organizational expertise: With flipping houses, time is money, so you need to execute the flip as quickly as possible. This requires an organized mind. You have to act as contractor to make sure all materials are delivered on schedule and that your subcontractors aren’t tripping over one another.

•  Basic math skills: To be relatively certain that you will earn a profit, you need to be able to crunch some numbers. Overestimate expenses and underestimate profits to give yourself a safety buffer.

•  A supportive family: If you’re married, make sure your spouse supports this new venture. Otherwise, you will not only be fighting the world to flip houses for a profit, but you will also be fighting your partner. This often leads to failure both with the new venture and with the relationship.

You may notice that some skills have been omitted from the list, such as the ability to rehab a home or the ability to list and sell the home yourself. You do not need to have all the skills required to flip a home yourself. However, you do need to be able to fill the gaps with people who have the essential skills. For example, if you are not very good at estimating the costs of repairs, you may want to hire a contractor or professional home inspector who is aware of repair costs to inspect the home and provide you with detailed estimates. A real estate agent can often be indispensable in assisting you in determining how much to pay for a property and how much you can eventually sell it for.

The number of houses going to foreclosure each week in Wayne County is staggering. About 90 % of them are in Detroit and may not be the best bargains. Many however are in the suburbs and could present good buying opportunities.

Foreclosure is a long, drawn-out process that usually begins as soon as the homeowner stops making monthly mortgage payments on time and ends when the homeowner negotiates a solution with the lender, sells the home and pays off the mortgage, or has the home sold at auction and eventually leaves voluntarily or is evicted. As an investor, you can jump in at any stage of the foreclosure process:

•           Preforeclosure: Purchasing the home directly from the homeowners prior to the auction often results in the best deal for both you and the homeowners. Because the foreclosure notice hasn’t been published yet, other investors may not be aware of the situation, reducing the competition. To discover pre-foreclosure opportunities, however, you need to network with people in your neighborhood and let them know that you buy foreclosures, so homeowners who are having trouble making their payments will know how to contact you. It also helps to network with bankruptcy attorneys, divorce attorneys, mortgage brokers, real estate agents, and others who may hear about foreclosures very early in the process.

•           Foreclosure auction: The foreclosure auction is the next stage in the foreclosure process in which you can acquire a property. Foreclosure notices are typically posted in newspapers and county news publications, complete with the date, time, and location of the sale along with details about the property, its owners, and the attorney representing the bank. To successfully bid at a foreclosure auction, you really need to do your homework and know what you are bidding on and how much it’s worth. Otherwise, you can get stuck paying tens of thousands of dollars for a worthless piece of paper. Don’t let this scare you off. You can find great deals at foreclosure auctions as long as you know what you are bidding on and you set your bid limit before the bidding commences.

•           Post auction: Just because the auction is over does not mean that you lost the property for good. If an investor purchased the property at auction, you may be able to purchase it from the investor. If nobody bid on the property, the bank takes possession (after any redemption period), transfers the property to its REO (Real Estate Owned) department, and then hires a real estate agent to list the property for sale. By establishing a relationship with the REO manager, you may be able to get an early lead on the property. In areas that have a redemption period, you may also be able to work with the homeowner to buy back the property from the investor who purchased it at the auction and give the homeowner a little extra cash for helping you do this. (During a redemption period, the homeowner has the right to buy back the property from the investor.)