House Flipping as an Investment – Yes or No?

Jeremy Biberdorf  |

Written by Jeremy Biberdorf

You may have seen the recent stories about the apparent decline in the number of people investing in properties to flip. Some people are wary of the potential increases in interest rates; others see a lack of suitable properties to invest in. The truth is that it's still possible to make significant profits from house flipping but you need to make wise investment choices.

Let's start by saying that huge profits on a single investment are rare. You need to be prepared to work hard, study properties before you buy and build up a portfolio slowly. Be patient, and do not run at investments full pace, in an attempt to make as much money as possible.

Start Slowly as a Property Investor

It's never a good idea to rush into house flipping before you do the groundwork. Start by acquiring as much knowledge on the subject as possible. It helps to read the best books by the experts. They give you the benefit of their wisdom which helps you to avoid some of the basic mistakes.

You also need to research the housing market so that you have a good idea of which areas are the best when it comes to property investment, and which type of property attracts the most interest from potential buyers. For instance, in an area where there are top class schools, a family home which requires refurbishment may be a good investment, as flipping should not be too difficult, once the refurbishments are completed.

Consider Using a Wholesaler When You Start

It can be daunting to house flip for the first time, so many novices consider using a wholesaler. Wholesalers can turn a house deal over to you in return for a fee. Of course, many wholesalers do not have a lot of experience themselves, so what they state is a good deal may not actually be that golden. You still need to pay careful attention to each deal that you invest in.

Always Remember the 70% Rule

The 70% rule is one of the most important things to remember, if you want to turn house flipping into a profitable experience. It helps you to establish whether a property is worth investing in to start with.

This is how the 70% rule works.

  • Check with real estate agents how much a property would be likely to make once refurbishment is completed.
  • Find out how much money you will need to spend on repairs and refurbishment.
  • Multiply the estimated selling price by 70% and subtract the estimated cost of refurbishment.

The figure that you are left with is the maximum price that you would to be able to buy the property for in order to make the investment sufficiently profitable.

Some investors may have withdrawn from the house flipping market, but this does not mean you should not see house flipping as a good means of investing. It's all about building your knowledge and contacts and making sure that the deals you enter into have the best chance of securing a reasonable profit.

DISCLOSURE: N/A


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Comments

Watchlist

Symbol Last Price Change % Change
AAPL

     
AMZN

     
HD

     
JPM

     
IBM

     
BA

     
WMT

     
DIS

     
XOM

     

Level Headed at World Crypto Con - Steve Beauregard

Bloq.com CRO Steve Beauregard joins Jack Brewer at World Crypto Con.

Emerging Growth

MGX Minerals Inc.

MGX Minerals is a diversified Canadian mining company listed on the Canadian Securities Exchange. MGX is engaged in the acquisition and development of industrial mineral deposits in western Canada that…