“House flipping” is where a person buys a home (often at a low cost) and then immediately re-sells it for a profit. Typically these houses have a “six months or less” turnaround time. It’s a real estate investment and moneymaking technique that reached epic heights during the first decade of the new millennium. Then, it was all but obliterated when the housing market crashed in 2008. Now, though, it looks like it might be making something of a comeback.
It is important, no matter how anxious you are to grab a piece of that house flipping pie, to go slowly. Justin Singletary, a real estate investment expert, likes to remind potential house flippers that they need to make a lot of decisions before buying that first house. In an article for Dictated News, Singletary explains that before diving in to the pool, investors need to consider everything from individual housing markets to the cost of potential upgrades.
Another reason to go slowly is that there are a lot of huge real estate investment companies who for years have been buying up the value reduced real estate and turning it into rental homes. This doesn’t leave a whole lot of options for first time house flippers, who might not necessarily be interested in rehabbing a house before they try to sell it for an inflated price.
Still, if you are hoping to become a house flipper, that’s where the money is: houses in need of upgrades or repairs are harder to sell so they go for a lower price. You, the house flipper buy it (after a while you might even be able to buy houses outright for cash), fix it up yourself and sell it for a higher value, thanks in part to the upgrades you’ve made…provided that the cost of the upgrades doesn’t eat up your entire profit margin.
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If you have the money, you should also consider going after apartment buildings or complexes or even commercial properties. Multi-family and commercial real estate is just as “flippable” as single family homes. According to the Albuquerque Journal, many owners scramble to sell these properties because they’re facing bankruptcy and selling the properties helps them postpone those proceedings.
Whatever you’re hoping to flip, experts agree that—if you don’t want to lose your shirt—you use the following tips:
There is no rule that says you have to flip where you live. In fact, if you’re living in an area with a slow recovery, you could hurt your profit if you invest there. Go after properties in markets that are thriving and showing great recovery rates.
This is particularly important for flippers who are aiming at rehab or refurbishing projects. Remember: upgrades, improvements, remodeling—it all costs money. Figure out how much you are willing to spend (or how much you can afford to spend) and include that in your buying budget. This way you don’t have to worry about whether or not you’ll break even.
Your buying the house isn’t going to be the hard part. Re-selling the house is the hard part. Mortgage rates are going up all of the time, making it difficult for people to afford to buy. Keep this in mind when you set your selling price.