Flipping homes can be a lucrative business if it is done correctly.
Sandra Delgado
2013-03-23
Views 17
http://www.3fhome.com
The practice of flipping homes earned something of a bad reputation in the last housing boom, as speculators flipped literally millions of homes for nothing more than a quick profit. Flipping also attracted some bad press when television shows such as 'Flip That House' encouraged many people to jump into flipping without really knowing what they were doing. As a result, a lot of people got their fingers burned.
But the truth is that, done right, flipping homes can still be a very lucrative business model, as one young 25 year old is currently finding. Having left his $20 an hour job selling shoes, he now flips property in Northern Virginia, and turning over just one property a quarter last year netted him $125,000 in profit. However, to make this sort of money--and a lot more if you work at it--you have to know what you are doing.
Flippers in the past were very much speculators, and based their success on the continued rapid rise in house prices. Today the market is very different; what this means is that we are seeing a very different breed of flipper. Careful research and a cautious and calculated approach to the market are the keys to success these days. Price is important, but it is no longer the only determining factor when it comes to flipping; the equation is a complex mix of such things as interest rates, the availability of inventory, the rate at which property values locally are rising, the willingness of people to buy, and much more.
To give you an idea of just what is involved, here is just a taste of some of the things a flipper has to consider today.
The need to buy low and sell high. During boom times this is simple enough, and with rapidly rising prices, it is difficult to get this part of the equation wrong. In today's market however you cannot rely on rising prices, and must buy at well below the current market value and realize a profit on the current market value figure, and not on some possibly higher future value.
Recouping the cost of renovation. People often say that the secret to flipping lies in taking a rundown property and turning it into a dream home by spending a bit of money on renovation. Now, there is some truth to that, but this is also an area in which many people get caught out. Spending $15,000 renovating the kitchen will certainly make the property more attractive to a potential buyer but, while most people think that this will add perhaps $20,000 to the value of the property, in reality it adds about $10,000. Renovation is a tricky business and it needs to be planned carefully to ensure that you get your money back.
The practice of flipping homes earned something of a bad reputation in the last housing boom, as speculators flipped literally millions of homes for nothing more than a quick profit. Flipping also attracted some bad press when television shows such as 'Flip That House' encouraged many people to jump into flipping without really knowing what they were doing. As a result, a lot of people got their fingers burned.
But the truth is that, done right, flipping homes can still be a very lucrative business model, as one young 25 year old is currently finding. Having left his $20 an hour job selling shoes, he now flips property in Northern Virginia, and turning over just one property a quarter last year netted him $125,000 in profit. However, to make this sort of money--and a lot more if you work at it--you have to know what you are doing.
Flippers in the past were very much speculators, and based their success on the continued rapid rise in house prices. Today the market is very different; what this means is that we are seeing a very different breed of flipper. Careful research and a cautious and calculated approach to the market are the keys to success these days. Price is important, but it is no longer the only determining factor when it comes to flipping; the equation is a complex mix of such things as interest rates, the availability of inventory, the rate at which property values locally are rising, the willingness of people to buy, and much more.
To give you an idea of just what is involved, here is just a taste of some of the things a flipper has to consider today.
The need to buy low and sell high. During boom times this is simple enough, and with rapidly rising prices, it is difficult to get this part of the equation wrong. In today's market however you cannot rely on rising prices, and must buy at well below the current market value and realize a profit on the current market value figure, and not on some possibly higher future value.
Recouping the cost of renovation. People often say that the secret to flipping lies in taking a rundown property and turning it into a dream home by spending a bit of money on renovation. Now, there is some truth to that, but this is also an area in which many people get caught out. Spending $15,000 renovating the kitchen will certainly make the property more attractive to a potential buyer but, while most people think that this will add perhaps $20,000 to the value of the property, in reality it adds about $10,000. Renovation is a tricky business and it needs to be planned carefully to ensure that you get your money back.
Report form
