How To Make Big Profits By Flipping Real Estate
Posted on November 27, 2008
Filed Under foreclosure real estate property |
Investments in real estate have always been a fairly safe way to invest your money. Recently there has been an increase in people buying real estate solely for the purpose of improving the home and then turning around and reselling the home hopefully at a profit. This type of investing in real estate however is not nearly as safe and depending on the outcome could bring a great profit, little profit or put your bank account in the red.
Due to the popularity of buying, improving and reselling real estate in recent years there is even a slang term, which refers to this practice called “Flipping”. Flipping is used due to the fact that you are buying a home improving on in some ways and selling it at a higher cost then you bought it for and invested into it, therefore flipping.
If done correctly buying and selling real estate can turn a great profit but there are a few key points to keep in mind should you decide to invest in this practice. First of all it is important to thoroughly inspect the prospective home and property. Looking for resale value is the best way to determine whether you will be able to invest enough to sell the property at a profit or if you will have to take a loss.
Determining neighborhood property and home values is a great place to start, finding out the minimum and maximums the general public will be willing to pay for your real estate. For instance, if you purchase the house and land for a low cost compared to the other places in the neighborhood may look like a deal, however you still have to consider the amount of money you will need to invest to resell the home at a higher value. If you are going to have to make a lot of improvements to sell at a comparable price for that specific neighborhood the property may not be worth the time, energy and funds needed. Additionally it will be difficult to have a profit from a real estate such as that.
Another important key point to keep in mind with real estate is the amount you will need to invest in order to improve and update the property that will make people want to purchase it. If you will need to do major renovations at a high cost your profit margin will slowly seep away. However if you only need to update the home enough that there will be more appeal it may be a great investment. Updating a home can raise the market value quickly with little cost to you. This will appeal to buyers and you will be more likely to resell the property at a profit.
Buying and selling real estate is a risky business that takes great time, energy and investment of funds. With careful consideration and evaluation you can find the property that will eventually be sold at a profit.
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5 Responses to “How To Make Big Profits By Flipping Real Estate”
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Which venue would make a better side busines: trading stocks or flipping real estate?
I have $25,000 cash and I'm looking to invest my money into an activity that could eventually become a "business" and replace part, if not all, of my annual income. I'm considering either swingtrading stocks or flipping houses. Which should I chose?
SWING TRADING
Pros:
I can get started right away bc I have some money already saved.
I don't have to monitor my positions 24/7 because I will be holding positions from 3-10 days.
Easier to swing trade while holding down a full time job.
Cons:
1) To make substantial profits, I would need more than 25k.
2) Huge learning curve even though I have studied the subject for over a year.
HOUSE FLIPPING
Pros:
It's a buyers market!
Not as risky as swing trading stocks.
Even if I can't flip a property, I can rent it out and build equity.
Cons:
I would have to wait another year to get started so I could save capital for improvements.
Not as easy to do with a full time job bc I would need to be on the jobsite
this is a hard question to answer because both markets are good for long term investment. at the moment it seems like the stock market is the way to go, just make sure you diversify. at least you can have a larger return on investment with stocks right now since the housing market is currently stagnant if not falling. keep a keen eye on the housing market over the next several months and invest in real estate when it seems that the number of homes sold increases from one month to the next for 3 or 4 consecutive months.
good luck!
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I would suggest you go into real estate. There aren't many succesful day traders anymore. It's to risky. If you do go into real estate, however, I would suggest you become a middleman when it comes to flipping. You can find the bargain houses, get them under contract, and sell them to someone who specializes in rehabs. There are ways to set the contracts up to where you don't have to put up any capital. This way you can build capital with relatively no risk, plus someone else can put up with the headache of rehabing and trying to resell. After you make enough, then you can start rehabing on your own without having to rush to make a sell. If you do rehabs, I suggest you hire contractors and not do it yourself for the simple fact you can do multiple projects at one time without getting tied up into one project.
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HOUSE FLIPPING. JUST START SMALL AND LEARN TO DO SOME OF THE WORK.
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Whichever you are actually better at is probably what you should go with. And by that I mean do you have the aptitude and skills to go with either of your choices.
With the house flipping, how much do you know about home renovation / rehabbing? Are you able to do projects after hours and complete them in a timely and profitable manor (e.g. retiling a bathroom, putting up drywall properrly, etc) if you don't have the specific skillset do you know or at least have a good connections to find people who do have the necessary skills? Do you know a good general contractor who can be your project manager and knock stuff out while you're at your primary job?
Do you have tenant leads lined up?
As for the stock trading, have you done mock trials and how have they worked out? (keep track of what you would have bought at how much then waited for a period of time before retending to sell, record the profit/loss). Then of course, how did you do?
I personally like the stock market as a whole to gambling, I know some tidbits about certain sectors of the market and that's what I'd limit my transactions to.
Frankly the answer comes down to what you're more comfortable with and think you can do better at.
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