Real Estate Investment Tactics: House Flipping

Last month we talked about the reasons why it’s worth investing in real estate. This month we will look at tactics on how to achieve that. One can accomplish a successful investment in several ways, one of them being house flipping.

But what exactly is it?

House Flipping refers to buying a property at a lower price (usually below market value) and proceeding to renovate it to sell it at a higher value. When undergoing house flipping, the investor never buys a property for residential use but rather only for investment purposes. The property that is purchased is usually a fixer-upper meaning that it is a home that is not move-in ready and most of the time requires repairs and upgrades. House flipping is considered a short-term type of investment because the investor owns the property only for a few months. The profit earned, derives from the difference between the buying and selling price.

What are the advantages of house flipping?

Immediate profit

House flipping provides immediate profit that can also be very decent in its amount. Because the investor holds on to the property temporarily and resells it once the renovation is completed, they can enjoy their profit in a short amount of time. There is not a fixed profit one can gain, but the average amount with every house flip is around 30,000 to 40,000.

Can turn into a full-time or part-time job

A lot of investors turn house flipping into their full-time job, once they get the hang of it. It can provide enough profit for that to be a possibility. Other investors prefer to keep it as a side activity or part-time job that they engage with especially when in need of more income. That could be the case right before vacation, for saving purposes or just for someone’s retirement fund.

Improves neighbourhood value

House flipping helps cities or neighbourhoods that have a lot of neglected and undervalued buildings or properties. By upgrading and renovating them, the house flipper helps solve the problem of decayed properties that are dragging down prices.

Investment diversification

House flipping helps investors diversify their investment portfolio. As mentioned in the previous article, real estate is considered one of the most stable types of investments. Meaning that it doesn’t tend to lose its value completely and can always appreciate over the years. House flipping can provide just another way to diversify and have multiple sources of income.

What are the disadvantages of house flipping?

High cost

House flipping can mean high expenses because the investor must not only pay the price for buying the property but also the renovation expenses. This capital can either be made through lending or can derive from the investor’s wealth.

It is not seldom that sudden issues will appear while fixing and renovating properties. These issues could be related to mold, termites etc. As a result, the investor must pay for extra costs meaning that he has to be prepared by providing sufficient capital.

Having good knowledge of the real estate market

Although house flipping may seem pretty straightforward at first, it is actually a tricky procedure that requires an in-depth knowledge of the market and how things work. Also, it would be of advantage if the investor had a team supporting them throughout the procedure. Finding the right people can be of service because it is not rare that lawsuits may appear, or difficult situations cause mistakes that could otherwise be easily avoided.

The property may not be sold straight away

Another disadvantage is the fact that houses may not sell immediately. This means that the investor has to take care of expenses such as mortgage payments, property taxes and homeowners’ insurance until a new owner is found.

No passive income is generated

Investors can unfortunately not generate passive income through house flipping. Only one stream of income is being created by selling the property that can be calculated from the difference between the buying and selling price.

Is it worth it after all?

House flipping can no doubt be a very profitable process. But if the correct steps are not being followed, success is not always guaranteed. If the investor knows the process very well and has gathered experience it will be an overall easier and smoother process. Sometimes house flipping can even become someone’s full-time job if done correctly. The important thing is to set smaller and more realistic goals if you are just starting out, so you know that you’ll be able to accomplish them step by step.

Progreece specializes in transforming abandoned spaces into luxurious apartments and studios. Our investors can buy a property from us below the market value before it is renovated and then proceed to sell it at a higher price, gaining the difference in profit. Our expert team can serve your every need and can support your investment journey from day one, making the first steps so much easier.