How to Make Money in Real Estate by Flipping Houses
by Chris Johnson, guest author
How to Make Money in Real Estate by Flipping Houses Perhaps you have heard the term in real estate called flipping but are not quite sure what it means; very basically it means buying a home relatively cheaply and then turning around and selling it for more than you paid for it.
Originally it was a simple buy and sell; you bought the house, did minor repairs, if any at all, and then turn around and sold it for a profit. However, that was when most of the cities were experiencing a 20% appreciation annually. The appreciation is a help because you will not add hardly any value to the property that way; you actually make a profit by purchasing it below market value. However, the cost of the transaction can take up to 15% of the final price; this means that in today’s market if you buy a house for about 20% less than its value you may only make a very small profit.
Another common form of flipping is selling contracts; this strategy calls for you to make an offer and then sell that position to another investor. For example, after repairs a house has the potential of a $20,000 profit based on that offer that the seller accepted; then you sell the contract to a different investor who will do the repairs. You may make $5,000 and he may make $15,000 but considering the fact that you risk nothing because no cash was invested, except perhaps a small deposit ($500) or earnest money.
Another form of real estate flipping is what is called flipping fixer uppers using sweat equity. Many people automatically think of this option when they are considering real estate flipping; find a home in disrepair, buy it cheaply and spend your own time doing the repairs and landscaping if necessary. You get this done as quickly as you can, put the house back on the market and hopefully make yourself a nice little profit. Doing this as your first investment can also bring about some good experience; by doing the repairs and any improvements yourself, along with the whole process, gives you the opportunity to know what everything costs.
It is also a lower risk as maybe you only make $5,000 but you would have lost money if you had to pay out $10,000 for other people to do the repairs, etc. Then you have those that flip houses as a business; some people will buy several houses in one year and have others do the repairs and whatever else is necessary to get the house in marketable condition. They may make less on each house than those that do it themselves, however, by being able to do that many in one year they end up making more of a profit overall. By using a good and reliable group of contractors who can be busy getting a house ready the investor can then spend their time going out and finding another house to flip; delegation is the key in this instance.
About the Author
chris has been writing articles for nearly 2 years.
admin; chris makes some good points, but it is NOT as easy as it sounds. I have done all of these things at one time or another, and the real keys are to
1.) Buy the property right… at least 20% below market.
2.) Do repairs to increase value. Avoid repairs with little return
3.) Sell it right.
4.) be prepared to rent it instead of selling it
If you try to sell your position before you close your transaction you will need very specific language in your purchase offer contract. Those word are your name, or assigns if you do not sign this way and may your offer this way you will not be able to assign or sell your position to anyone, and could incur a lot of liability. Good Luck.
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