Is House Flipping A Wise Way Of Investing In Real Estate?
For the uninitiated, real estate flipping is the process of buying a property that is undervalued, doing some fairly basic renovations and then reselling the property. The aim is to make as much profit as possible as quickly as possible. Is it a wise way to invest in real estate given the current state of the market?
If you look closely at what makes real estate flipping profitable, the current climate may not be suitable. Flipping relies on two components, cheap housing that requires renovations and demand for quality housing. It’s the demand for quality housing that drives down the values of housing in disrepair.
The market is probably the reverse at present. There are a lot of properties on the market so house prices are relatively low. The prospect of buying a home for $150,000, spending $30,000 on repairs and then selling for $200,000 and collecting a $20,000 profit are pretty slim. In fact, there are many home buyers that are looking at these properties as cheap entries into the home ownership market – they will do the renovations themselves over time.
Wise investors will find pockets where real estate flipping may be profitable. It’s a case of finding neighborhoods where demand is relatively high and buying the worst property in that neighborhood. Whether or not you can gain a decent profit is questionable. That is where a good real estate agent can help you with property trend information.
Investing in real estate by flipping may not be a smart move at present. However, investing in real estate for longer term gains is a realistic expectation. Property always increases in value over time and that is what makes it a great investment. The trend may not suit flipping, but real estate prices are low enough for the long term investor.
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