In a previous post on Bigger Pockets, we talked about long-term investments in real estate for rent to tenants, but another popular form of real estate investment is back. It’s a real estate reversal.
Once upon a time, real estate flipping was fairly common during the real estate frenzy and before the recession. People will buy real estate at a relatively low price, repair it, invest in some improvements, and sell it to new people for a decent profit. Many people have never been involved in real estate investment, which unfortunately contributed to the real estate recession.
It almost disappeared from public conversation when real estate prices went south. Foreclosure homes that could be easily improved were everywhere, but that was part of the problem. All cheap homes have reduced the prices of the unforeclosure homes that surround them. You can improve every home you want, but if you set its price too high compared to every other home on the market, it will decline. If you had to set a high price to get back what you invested in improvement in some way, you were probably destined to lose money on your investment.
Of course, now that the real estate market is improving, real estate flipping is back. The housing market is fully recovered and it is possible to make a profit again by buying, repairing and selling at higher prices. Real estate flipping, like any other type of investment, can make a lot of money for your nest eggs, but it’s a risk.
Three questions to ask yourself before trying to flip a property:
- What is the local market like? Real estate is very local. Not all places have recovered in the same way. How much is the price of the house around the property? How many properties are for sale in this area? How many foreclosures or short-term sales? Was there another flip nearby? The price of a nearby property affects the amount of money you can sell your home.
- How much do you need to invest in real estate? Some places need cosmetic updates for a good flip, while others require more intense work. The more work they need, the more money and time you need to tie to your property. The property may look cheap now, but if you find yourself paying for an unexpected problem in the future, you may be singing another song. The last thing you want to do is lose money on flips by spending too much.
- What is the potential resale value of the property? The amount of money you spend to fix it should be balanced with what you think you will get at the time of sale. It’s not enough to match the price of the upgrade to the price you paid for the property. The price should be comparable to other properties. If you invest too much, you may not be able to get back the money you spend in some local markets. Before you buy a property, evaluate it as if you had already upgraded and compare this “Dream House” with other similar properties in the area. This will help you determine if moving forward is a good idea.
Buy, modify, sell. In the most basic terms, it looks very simple, but there’s much more to be successful in real estate flipping, such as knowing about the effects of taxes, limits on the speed of real estate resale at associations, and more. .. These questions can get you started, but they point to the basic essence of flipping and suggest the biggest points of problems that flippers encounter. But if you have the traits you’re thinking of, but you can’t get a positive answer with these simple questions, it’s not even worth scratching the surface of the more complex problems of real estate flipping.
What do you think about playing? Let’s talk …