Flipping is an investment strategy that many real estate investors choose to pursue. With this strategy, you will potentially be able to make quick profits and minimize risk. Here are the basics of flipping and how it works.

Flipping

The act of flipping involves purchasing a property and then selling it soon after. The purpose of this is to try to realize a quick profit between the two transactions. Generally, flipping is considered a short-term type of investment. If you purchase a property and then hold onto it for an extended period of time, this would not necessarily qualify as flipping. Here are a few of the different variations of flipping.

Multiple Investor

One type of flipping involves multiple investors. This transaction starts out with an individual investor purchasing a property. Most of the time, this property will be purchased well below market value. At this point, the first investor then sells the property to a second investor. They might even assign the rights to the property for a small finders fee. With this scenario, the first investor would not actually purchase the house, but would simply have an option to buy it. The second investor will then take possession of the property and try to sell it to a customer. The last sale will typically be at market value or very close to it.

Real Estate

When flipping real estate, there are a few different ways that you could potentially try to make a profit. With one method, you will try to locate properties that are distressed and selling for much less than market value. With this technique, you are going to make your profit on the front end of a transaction. You might be buying property that is about to go into foreclosure, or has some other type of problem. In order to be successful with this technique, you will need to develop relationships with real estate agents in your local area. They will be able to keep you up-to-date on all of the properties that are available in the area for a major discount.

Another method that you can use to make money when flipping real estate is to purchase property that needs serious repairs. Many times, when a property is in bad shape, the owner will attempt to sell it cheaper than normal. Investors will then purchase this property and spend some time fixing it up to add value. At that point, they will be able to sell it and realize a profit.

Fix and Flip

With this strategy, the investor will usually have to make a bigger time commitment. In some cases, you will have to do considerable repairs to a property before you can sell it. For example, you may need to install a new roof, fixed the foundation, or place the flooring, or do any other number of repairs. Then you will be able to sell the property in good condition and make a profit.

 

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