Investing in Real Estate: Flipping for Rookies

The practice of flipping real estate is attracting would-be investors anxious to cash in on the growing property boom. Flipping promises good returns for a knowledgeable investor so before you whip out your check book; take some time to learn the ropes.

So, what exactly is ‘flipping’ and how do you start? Profits from flipping real estate are made in one of two ways. The classic scenario is to buy property cheaply and sell for a higher price. The other method is to purchase a house that needs renovation or repair, do the work and sell for a profit. This is where the phrase “fix and flip” originates.

The “fix and flip” scenario is lucrative for investors because most buyers are looking for a home ready to be occupied and are willing to pay more for it.

There’s little doubt that flipping is profitable. Nationwide, the first quarter of 2014 saw home flippers averaging a 30 percent gross return on their investment —compared to just 4 percent in the last quarter of 2013. As tempting as these percentages look, there are some things you need to remember before getting started.

First, take the time to study the business. There’s a lot of hype surrounding the practice of real estate flipping; there’s also plenty of information available. By doing your homework you can educate yourself on the hazards, not just the possible profits.

One claim you’ll come across when you start to research the industry, is that you don’t need any money to get started. You can buy a house with no money down. Beware of any get-rich-quick house flipping courses available to buy that make this assertion. As one financial advisor who knows the business said, “I’ve never seen someone actually do that.”

The promises of easy profits with a minimal investment are not reality. Actually flipping real estate requires a healthy bank balance. Any work or renovations will have to be funded and there are property expenses and taxes before you can realize a return on your investment.

The words “flipping real estate” suggest fast action and even faster profits. In reality, timing is everything and patience is essential. You’ll need to establish contacts and investors and find a buyer. By biding your time and waiting for the right deal will ensure you realize short-term profits.

To a certain extent, flipping requires nerves of steel. Many would-be-investors are kept from taking the plunge because of the fear of messing up when dealing with a big investment. The solution for this is knowledge. Learn everything you can about flipping. Talk to any people you may know who have experience in the sector. Read up about marketing property, talk to the experts and find out how to find motivated sellers.

Then you’ll be able to proceed with confidence, secure in the knowledge that you’re equipped to make a smart investment.

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