As this blog is all about flipping houses, I should probably take some time to define exactly what that means…
In it’s simplest form, flipping a house is the act of purchasing a property and then reselling it for a profit. Oftentimes, the property is purchased very inexpensively, either because it is “distressed” (i.e., in need of repair) or the owner of the property is desperate to sell (e.g., going through a divorce, got a new job out of town, is having financial difficulties, etc).
There are two basic strategies for flipping houses, each of which has it’s own benefits, drawbacks and risks:
Wholesaling. Wholesaling involves purchasing a property and immediately (oftentimes the same day or even at the same closing table) reselling it to another investor for a small profit. Wholesaling doesn’t require the house flipper to do any work on the house, and sometimes doesn’t even require the house flipper to put up the money for the house. A good wholesaler must be a strong negotiator and marketer, as he is merely turning around and selling the exact same property he just bought, but for a profit.
Rehab and Resale. This is what I do, and is probably what is most commonly thought about when someone hears the term “house flipping.” The investor will buy a property — generally at a large discount — bring in contractors to fix-up the property, and then resell the property, either to home buyer who plans to live in it or another investor who plans to rent it out.
To be successful in the house flipping business, you must be have a number of skills (or a backup team of folks to help you):
- You have to be able to find great deals. This may involve a real estate agent, or may just involve spending lots of time talking to potential home sellers and negotiating deals yourself;
- You have to be able to get houses renovated quickly and inexpensively. This often involves having a set of contractors who will renovate your properties skillfully and at a reasonable price;
- You must be able to sell your properties, either to homeowners or other investors. Again, this may involve a real estate agent (recommended!) or may just involve selling the properties yourself (known as FSBO or “For Sale By Owner”);
You must have the business and management sense to keep projects on-schedule and on-budget, and to make the proper renovation design decisions.
If you’re considering house flipping as a hobby or a business, we have lots of articles and content here at 123Flip.com that will help you jump-start your efforts. In addition, feel free to take a look at our First 50 Projects, check out our Blog to see what we’re up to today.