The recession is prompting many people to try flipping houses as an additional source of income. At a time when everybody wants to be secure financially, many are turning into real estate investing. They see it as easy and fast money and it indeed is for those who know how to fix and flip properties the right way. For those who want to start in this business, here are the properties you can fix and flip:

First in the list are fixer upper homes. These are basically houses that are in disrepair and are very cheap. Owners of these properties are usually struggling financially and could not afford to fund repairs. Other owners opt to rent or move to other places and thus see repairs as a waste of money. You’ll find scores of fixer upper homes across the country and one could be in your neighborhood.

When buying these types of properties, choose those that only need cosmetic repairs. These are minor repairs needed merely to beautify a home and raise its value. Examples of cosmetic repairs are applying a new coat of paint, laying out new carpeting, and improving outdoor landscapes. Addition of appliances, faucets and other plumbing fixtures, and electrical fixtures may also be considered as cosmetic repair.

It is given that fixer upper homes have damages but you should always be on the lookout for structural repairs. Structural repairs are those that are considered major and could eat up your repair budget. If the roof has a few broken shingles, then that won’t cost you much. But if the whole roof needs to be replaced, reconsider buying that fixer upper as it might cost you a fortune. Tearing down or putting walls is also considered a major and expensive repair. Termite infestation can be a headache, depending on the magnitude.

Apart from fixer upper homes, you can also buy REOs, or real estate owned properties. These are houses repossessed by banks from owners who failed to settle financial obligations like mortgage. A lot of these houses need very little cosmetic fix and flip. Houses up for a short sale might work a well. Inherited houses are ideal properties to fix and flip. Many owners prefer to sell these houses at very low prices. You can also target properties of divorcees. These homes are often easy to purchase as owners want to dispose of them, due to financial and emotional factors.

Learn more about ideal houses to fix and flip at REIwired.com. The website is a database of videos, sound files, and articles about real estate investing in today’s market.

The $10,000 question (actually in most cases, this question is worth much more than 10 grand): which house makes a good fix-and-flip candidate? Well there are plenty of attributes to consider when trying to answer this question. The first thing you should do is pre-qualify an entire area or neighborhood. When doing this, there are a number of factors you need to research. However, after you qualify an area (we can call this your “farm”), finding potential fixer-uppers will be much easier.

When qualifying an area, start at the city-level and look at data that is readily available on the Internet. First and foremost, check the quality of the school district within a city you’re analyzing. Make sure it ranks above average within your state. Second, check the crime rate for that city. Make sure it ranks below average for your state. If both of these results are satisfactory, it’s time to hone in on the neighborhoods within that city.

When qualifying a neighborhood, it’s best to choose a neighborhood that isn’t “slum cheap” but also isn’t “yuppie rich”. You want to find a nice medium price range of homes that is both comfortable for a wide market of buyers in your state and has a good level of desirability. The larger your market, the better your chances of selling a property quickly.

Choose cities and neighborhoods that are within a comfortable distance from your home. You will likely make over a dozen round-trips to this property, so unless the profit potential is enormous, try to choose something close enough that will be “worth the drive”. The final factor when choosing a neighborhood is to look at the past sales within the last year or two and figure out the answer to this question: what is the average number of days does it take to sell a home in this neighborhood? If the answer is “less than 90 days”, that indicates that there is a level of desirability and demand – something that definitely makes houses in this neighborhood desirable to you. There might be websites on the Internet that provide this information – if not, seek out your Realtor.

Once you have your target neighborhoods and you know what type of houses go for what kind of price, finding potential fixer-uppers becomes much easier. More often than not, these properties will come in the form of foreclosures. Have your Realtor conduct daily searches for you. Next, you’ll need to determine what your operational budget is. This is the amount of money that is readily available to you for rehabilitating properties. To reduce your personal financial risk, do not include money in your bank account(s) when calculating this number. Simply add your available credit lines on your credit cards. For example, if you have $2,000 left on a Visa and $7,000 on a Home Depot card, your operational budget is $9,000.

After hammering down what your operation budget is and you find a potential fixer-upper, have your Realtor give you a ball-park estimate as to what it would sell for in a fixed-up state. Likely, your Realtor will review past sales of comparable properties in that same neighborhood to come up with an accurate guess. Take that number and subtract 10% (this represents bargaining room with buyers) – this is your estimated sale price.

Finally, decide how much money you feel is worth all this effort. This becomes your target profit. Now you can determine how much you can afford to offer for the property by doing some quick math: (estimated sales price) – (operational budget) – (your target profit) = the maximum price you should pay for the property Now that you know the maximum price, be sure to offer well under it to allow for some bargaining room.

If a property is located in a “qualified area” and passes the “quick math” test, you have a strong potential candidate for a possible fix-and-flip property! For more free articles and previews to The Field Guide to Flipping Homes, visit the official site at www.homeflippingfieldguide.com!