There are a wide variety of ways to invest in real estate; Flipping homes is one of them – but not every investor is prepared for what house flipping involves. Understanding the process can help you determine if this is the right investment strategy for you.
According to Peter Loeser of TLo Property Solutions, “To be successful in real estate investing, it’s critical that you identify what skills you have and your tolerance for risk.” Loeser notes “Investors can make great profits by flipping properties even in this challenging market if they plan and are realistic.”
Loeser suggests asking some key questions:
First: What kind of income are you seeking, active or passive? Actively buying, fixing and flipping properties is quick cash that requires careful timing and effort. Rental properties on the other hand offer passive long-term income which accumulates over time.
Second: What kind of risk are you willing to take? Flipping is really speculation. When buying a flipper, one must gauge the cost of refurbishment, remodeling, and the cost of the holding time into the price valuation, then carefully market the home and realize the profit. Any number of variances can occur which could cause the value to drop and profits to reduce or even disappear, such as a delay in remodeling or a slow real estate market. Having ready cash to cover the unexpected is critical to success.
Says Loeser’s business partner, Kat Timpson, there is a third major consideration: “What kind of resources do you have?”
“Any real estate investment endeavor takes both money and a team,” notes Timpson. “So whether it is flipping to sell or rent, it is important to take the time to gather people who will be your resources – from your lender and real estate agent to a general contractor to an attorney. You want to cull a group of people who want you to succeed.”
Flipping houses is one way to invest in real estate. For those who are able to plan, especially for the unexpected, this model might be a great tool for wealth building. Understanding your market, resources, and risk tolerance is the first step in deciding if flipping is right for you.
