If you have a solid business plan and are willing to work carefully while assuming some risk, it is still possible to make a nice living in foreclosure flipping. Although there are no guarantees (as we said, there is some degree of risk involved, just like most investments), people are still realizing excellent returns from flipping houses.
What Is “House Flipping” ?
Flipping a house is nothing more than Econ 101: buy low and sell high. All that’s involved is finding a property that’s run down and in need of repair (this is the most common way of flip real estate) or a piece of real estate, usually a single-family dwelling, that is “distressed” – that is, the owner is in danger of foreclosure, or the property has been repossessed by the bank.
If you go with the former – which most of those engaged in house flipping do – you’ll need to have some serious construction and remodeling skills, or be prepared to hire it done. The problem there is that outsourcing your renovations like that can be quite expensive and eat into your profits quickly. Therefore, in order to maximize return on investment, most people in house flipping with run-down properties try to do as much of the renovations themselves as possible.
The other method of how to fix and flip real estate, which is to obtain a property from a “motivated seller,” is easier in terms of labor – but you may not realize as high a return on investment, and of course, it’s vital to have a buyer lined up ahead of time if you don’t want to be stuck with a major liability.
Local banks and mortgage companies are one source to go to when you get started flipping houses.
Another source is local real estate auctions. Note the operative word: “local.” If you start your house flipping enterprise with online auctions, you’re liable to find that such auctions are extremely competitive since they’re open to anyone with an Internet connection; the price can get bid up very quickly.
The fact is that very few people – even those who know how to flip a house and have a lot of experience at it – have the financial wherewithal to pay in full for such an investment up front. This is especially true however for those who are just starting out in flipping houses. There are however very short-term mortgages available; if you can qualify, this may be the best option for you. Keep in mind that the interest rate is likely to be substantially higher than normal, so be prepared to make the transaction as quickly as possible.
Flipping houses is a very effective way to increase your cash flow, provided you work carefully and plan ahead.