Flipping has become popular among investors around the country once again.
Like it was prior to the housing market crash in 2007, people are purchasing distressed properties that they believe have potential, mainly through a foreclosure or short sale, oftentimes at a price that is several thousand dollars less than what is owed on the mortgage, and then flip the property.
These days, there are plenty of foreclosures and short sale properties to choose from. Statistics show that close to 25% of home sales around the U.S. are foreclosures
After a few repairs, renovations, and upgrades, flippers re-list their recent purchase, in hopes of making a significant profit.
Here’s what you need to know if you thinking of joining the flipping business:
- There are many others doing this business.
In fact, according to the research firm RealtyTrac, the number of flips rose 25% nationwide in the first six months of 2012, when compared to the same time frame from the previous year. So, you’ll have some competition for those distressed properties in your city!
- You’ll also be competing against people who don’t want to flip a home, but are simply looking for a new place to live. After all, record low interest rates and falling housing prices have enticed many would-be buyers to search the market for the perfect fit.
Most importantly, you’ll have to work quickly.
Even after you find the right home, and beat the other would-be buyers to punch, just purchasing a distressed property and waiting for the housing market to improve isn’t enough these days.
Economists say that’s the main difference between flippers in the mid 2000’s, who gave the term a bad name, and their counterparts today.
Back then, investors looking to make a quick profit, swarmed in like vultures and bought as much inventory in a particular town as possible.
That won’t work for today’s flippers.
With the housing market still on the mend, the only way you’re going to make a significant profit on a flipping project is to actually flip the house – and quickly.
That means going in, updating out-of-date appliances, making all of the necessary repairs (both major and minor), and doing an overall kick-butt renovation to the home. You’ll have to spend a bunch of money to improve the house – but make sure that you can end up making enough of a profit to cover all of your expenses.
One final note – not every distressed property is flip-worthy. Some homes simply won’t sell for a profit, no matter how much work you put into them because of their style, location, age, etc