How do you flip a home?

By Jean Folger AAA
A:

Flipping (also called wholesale real estate investing) 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. Profits are typically derived from price appreciation resulting from favorable real estate markets and/or renovations and capital improvements. For example, an investor might purchase a "fixer-upper," make the necessary renovations/remodel ("reno/remo") and sell for a profit.

Investors who flip properties may concentrate on the purchase and subsequent resale of one property, or a group of properties. Many investors attempt to generate a steady flow of income by engaging in frequent and/or multiple flips.

So how do you flip a home? In simple terms, you want to buy low and sell higher (just like many other investments). But rather than a buy-and-hold investment strategy, you complete the transaction as quickly as possible to limit the amount of time your capital is at risk.

In general, your focus should be on speed as opposed to maximum profit; each day that passes costs you more money (mortgage, utilities, property taxes, insurance, etc) and increases your risk. If you are able to list the property below market value (while still making a reasonable profit), you will probably be able to move the property faster than if you try to eek every penny out of it (i.e., don't be greedy).

As with any investment, it is important to do your homework before risking your money. You should approach flipping as a business by creating budgets, conducting adequate research and understanding your customers (the people who are going to purchase your homes). Knowing how to make a property marketable and which renos/remos add value to the home can considerably affect your bottom line.

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