House flipping has become so popular that cable television stations air shows featuring this real estate technique. A&E features Flip This House, TLC features Flip That House, while Bravo's infamous Flipping Out, showcases high-dollar real estate costing thousands of dollars to renovate.
While these shows provide house flipping techniques, they mainly focus on the drama that occurs during the process. There is no doubt house flipping can be extremely stressful, but it can also be a rich and rewarding experience -- if you understand what is involved.
House flipping in today's market is considerably different than a few years ago. Although the real estate market is currently in a slump, investors have more opportunities to make money today than ever before. With the influx of foreclosures and bank owned homes, there are thousands of distressed properties selling well below market value.
The primary goal of house flipping is to buy and sell distressed properties quickly and turn a profit. Real estate investors purchase downtrodden homes at 75- to 80-percent of market value. They invest time and money into rehabilitating the house then sell the property at or above market value. Oftentimes, investors can flip a house in 90 days and earn 10- to 15-percent return on their investment.
People who enjoy do-it-yourself projects and newbie real estate investors are oftentimes attracted to house flipping projects. One of the main benefits of house flipping is repairs can be done during the evening or weekend hours. However, unless you are highly motivated or can afford to hire contractors to perform the work, house flipping might not be the best option for you.
The point of house flipping is to earn profits in a short period of time. Those who procrastinate about conducting work could end up losing money if they sit on the property for an extended period of time. Once repairs and renovations are completed, aggressive marketing tactics are required to sell the property quickly.
A lesser known house flipping technique is to purchase real estate owned REO properties through private investors. When investors purchase bank portfolios they buy multiple houses at wholesale prices. Real estate investors can buy REO homes for as little as seventy cents on the dollar. Instead of rehabbing the property, investors resell the house for 10- to 20-percent under market value and still turn a profit without lifting a finger.
There is no guarantee to the amount of money to be made in house flipping. However, the average profit margin ranges between $10,000 and $30,000 per home. If you are able to purchase four homes per year and net $10,000 profit per house, you can increase your annual income by $40,000. Imagine what you could earn if house flipping yielded $30,000 or more per house!
House flipping may or may not be right for you. Before you invest in foreclosures, bank owned or other types of distressed properties, invest time to research what is involved in this type of real estate transaction. Doing so could save you a tremendous amount of time, money and frustration.
Published on August 04, 2008 at 10:23 PM
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