Flipping is a type of real estate investment strategy in which an investor purchases a property with the intention of selling it quickly and for a profit. For example, an investor might purchase a “fixer-upper,” make the necessary renovations and sell it for a profit. Profits are typically derived from price appreciation resulting from favorable real estate markets and/or renovations and capital improvements.
By repeating this process multiple times, investors attempt to generate a steady flow of income.
Speed is the name of the game. Just like stock trading, the objective is to buy low and sell high in order to make a profit. Rather than buying to hold though, you aim to complete the transaction as quickly as possible to limit the amount of time your capital is at risk. In general, each day that passes costs you more money (mortgage, utilities, property taxes, insurance, etc) and increases your risk…these are sometimes referred to as your “carry costs”.
As with any investment, it is important to do your homework before risking your money. Flipping should be approached as a business where creating budgets, conducting adequate research and understanding your customers (the people who are going to purchase your homes) is paramount. Knowing how to make a property marketable and which renovations add value to the home can considerably affect your bottom line.
When the property market is “hot”, flipping tends to become more popular with investors as there is a steady flow of ready buyers wanting move-in-ready homes. Conversely, when there are more sellers in the market than buyers, your property has the potential to sit for longer before being sold and thus add to your carry costs.
Please contact me for more information about flipping and for help in finding suitable homes to get your property flipping business started either in California or elsewhere in the U.S.A.