Flipping real estate is a buzz term that has come screaming into mainstream media in the last few years. Its growing popularity is evident by the magazine articles, TV shows, and Average Joe teams trying to break into the business. Is it easy? What is it? How does it work?
Flipping real estate simply means purchasing or acquiring a property then reselling it quickly while attempting to turn a profit on the sale. Flipping can be handled several different ways and when done properly, each of them can be very profitable for a real estate investor.
Likely the most common form is the tried and true “fix and flip”. This involves a real estate investor picking up a property at a discounted rate, doing the necessary work to get the property up to acceptable standards, and then selling the home on the market – generally to someone who will live in the property. This type of fix and flip can get you anywhere from $15k to $50k on a closure depending on the market and of course how good the bargain was on the home when you bought it. You can set yourself up for failure if you underestimate the cost for remodeling and repairs or do not consider the cost of a real estate agent when listing the property for sale.
The fix and flip is a very popular method of doing business, and that means there are a large number of real estate investors looking for remodel properties. If you can get a property at a relatively good bargain, you can turn around and immediately sell the home to a real estate investor who is willing to put all the work in and take the project the rest of the way. You can make several thousand in this manner on each sale. While the number is small, you can quickly see how it would add up after quickly reselling multiple houses in this manner.
Fix up work is not for everyone, and some real estate investors want to quickly move a house without sinking money into a professional contractor. If a house is in sellable condition and requires little immediate maintenance work then you can consider just selling it as is. Even if a home is in poor condition, you can make a quick sale if the real estate market is in good shape and the property is in a transitioning neighborhood.
Instead of tossing the property for all cash right away, you can try and sell for terms. Once the remodel and refinishing is completed, refinance the property. Provided you were able to punch the math up right, you should not have any money tied up in the deal (or very little at least). You can turn around and sell the real estate investment on a lease, with option to buy. Any rent payment that you make from your renter (buyer, hopefully) can be used to handle the mortgage payments. This way, when the tenant goes for the option to purchase you’ll end up reaping a larger profit – mainly because you don’t have to pay a broker fee.
I’ve identified the ways to flip a property for virtually every real estate investing scenario. These methods all work extremely well, so it is only a matter of determining what works best for your real estate investment strategy and your overall goal.
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