Real estate flipping is a real estate investment strategy that focuses on short term profits by buying run down properties at low prices, fixing them up, and then reselling them within a short period of time for a profit. The key to this strategy is locating affordable properties in desirable neighborhoods that can be renovated and re-sold within a short period of time. The goal for many real estate flippers is to resell properties within ninety days.
Flipping has become very popular, with many real estate courses, seminars and even tv shows devoted to the topic. There is a lot of money to made in real estate flipping, but there are also risks involved as well as skills and knowledge that need to be acquired in order to be successful with real estate flipping. Real estate investing requires an understanding of local real estate laws and regulations and having the ability to forecast profits based on a good understanding of property values and renovation costs. Flippers must also have access to a line of credit or have an investment partner in order to finance their flips. Finally, the flipper will need to either have the ability to do repairs and renovations themselves or have qualified contractors available to do fast renovations for them.
Flipping does involve a fair amount of risk due to the fact that investors count on the fact that they can quickly resell properties with minimal costs or delays after purchase. Real estate is an illiquid asset and is not always easy to move quickly. Any unexpected costs or delays in the renovation or sales process will eat into the potential profit that can be made.
The best properties for real estate flipping are those that are basically structurally sound but may have some cosmetic problems such as peeling paint, overgrown yards, old carpet and other unattractive features that are affordable and easy to replace or fix. The properties also need to be in desirable neighborhoods. Properties that need extensive plumbing, wiring and structural renovations are not good candidates for real estate flipping. Properties should always be professionally inspected to assess what repairs and renovations are necessary. The flipper will use this information to estimate the profit that can be made on the property.
It is important to not over improve or do unnecessary renovations to the property. The key to flipping is to buy low and sell quickly. Any delays or extra expenses will cut into profits. It is vital that the work can be done quickly and inexpensively.
Once the renovations are complete it is time to sell the property. The property should be attractively staged with a few pieces of furniture in each room to give prospective buyers a feel for the aesthetics and livability of the property. The flipper should have a marketing plan ready before renovations are even finished so that the property can be quickly re-sold for a good profit.