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Property or house flipping is a growing and popular trend in the U.S. real estate sector. It is legal and can be a potential source for huge income if you know the ins and outs. The process is not easy but learning about it might just entice you to try it out yourself.
Property flipping refers to the purchase of a real estate by a certain investor and quickly reselling it at a higher price in just a matter of days or a few months. The technique is to look for properties, especially homes, that are under-priced and whose values can be marked up after some renovations. A home is normally sold at a lower price due to several factors such as a divorce, the owner was laid off, the home is about to be foreclosed or a death occurred in the household.
Flipping a property for a profit became popular from 2001 to 2005 during the housing boom in the U.S. Its popularity remains and the process has, in fact, inspired TV shows like A & E’s “Flip This House” and TLC’s “Flip That House.”
There are actually two common ways to flip a property. The first one is to buy a house and resell it at a profit without occupying the property. The other method is acquiring a property, renovating it and then selling it again at a profit. This is referred to as the fix and flip whereby the profit comes from the improvement of the home and/or market appreciation.
Although there are many honest investors engaged in this kind of business, those starting out should be wary of fraudulent investors. Investors or the so-called property flippers begin by researching on prices in the local markets. Then, they search through home listings with the words “must sell,” “needs work” or “vacant. These investors usually pick properties that need repair and develop rapport with real estate agents who inform them right away when they chance upon distressed properties. Some serious flippers go to the extent of doing direct-mail campaigns or place advertisements on local papers or billboards.
Property flippers also target foreclosed properties because the banks or other investors who own them are often very interested in getting whatever they can for the homes. The Department of Housing and Urban Development’s website provides links to listings of foreclosed properties.
Investors can gain huge profits in flipping a home if they know how to do it right. There are several important considerations that you have to take into account notably in setting the selling price. Think about the six percent realtor commission if you plan to sell the property through an agent. But if you can sell it yourself, the better. Next, consider the repair costs as well as the time and labor you put in the process.
Understanding your markets is also vital. It means knowing what local home buyers want and investing in the right properties. It is said that the best property flippers are those who can line up buyers before they even purchase the property.
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