Flipping Property
“Flipping properties” is where a real estate investor purchases a property for less than its value, makes the necessary repairs and updates, and then sells the property for a profit usually within a short period of time. You may have watched the TV shows that chronicles the rehab process and shows great success with people who can really afford problems that occur during a rehab process. Somehow, it’s always in great neighborhoods, the purchase and rehab cost are very high and the profits are very high. Sounds like entertainment for TV. News Flash! THAT’S NOT REAL LIFE!!! Flipping properties for the average investor can yield great returns but not without a little headache. It could come from a lack of experience, theft, time on the market, contractor problems, etc. Flipping real estate requires one to very educated in the business having the mind of an appraiser, realtor, contractor and being able to financially sustain hold periods and unforeseen issues.
In the beginning…
Only a few years ago, investors with extra money could easily invest in flipping properties and realize a quick and profitable return. Ordinarily, this would be the perfect time to invest because foreclosure rates are at their highest in the history of the United States. As a result, there are a lot of properties priced significantly below market value that are available for purchase. But, you’d better know exactly what you are doing because it could be potentially dangerous and have a very serious impact on your financial health for years to come.
You are personally accountable
Flipping properties can be an attractive and a tempting investment because of the potential to yield substantial earnings, however, it has also proven to be difficult. The economy has severely affected the way real estate is purchased and sold these days, especially from an investor’s perspective. The dynamics of lending have changed with banks and they are heavily scrutinizing buyers and investors. These lenders have lost so much money from foreclosures that quite frankly, they’re scared. Those who are able to acquire investment properties are having difficulty finding qualified buyers due to the tightening of lending guidelines. As the owner, you are financially responsible for all the monthly debts involved in holding investment property such as the mortgage payments, taxes, insurance, utilities, and maintenance until it sells or you find a tenant. This is the number one reason why you must be experienced and savvy to flip properties these days. Most investors don’t anticipate paying expenses for 6-8 months and, as a result, they deplete their savings and retirement. Ultimately, the lender may foreclose on the property or for the cash investors, you run out of money.
Today’s investor must be very wise
Investors must use extreme caution when hiring and depending on other professionals such as contractors and realtors. Contractors usually only understand how to repair or rehab a property from their perspective. If they don’t know your point of view as an investor in real estate, they will not understand the intricacies involved in flipping and too often give bad advice. Realtors are frequently less equipped when it comes to investing. Realtors are taught to sell properties, rarely will you run find one who has investment experience. As a result, they may give bad advice or simply don’t know enough to provide the critical information you need to buy investment properties.
Eric’s Tip: Do not hire Realtors or Contractors for investment purposes that currently don’t own real estate or not actively involved in buying real estate PERSONALLY.
Realtors are licensed to sell property and contractors are only responsible for making repairs. Flipping properties requires the additional ability to perform a detailed analysis, which includes ways to economically improve the property while maximizing the profit, as well as evaluating the market to predict what the after repair value will be. As an investor, you must become a student of the business and acquire extensive knowledge from a real estate investment professional that is able to walk you through the process step by step.
The Ultimate Solution
We have been in real estate for 25 years and have flipped many properties in those years. As real estate professionals (realtor, contractor, investor), we have developed an impeccable reputation and strongly recommend you join our Real Estate Investment Program to virtually eliminate all the risk mentioned above while creating a plan of action to establish wealth.