Why do People Flip Property

Normal people like you and me are constantly bombarded with advertisement for distressed properties, and there are quite a lot of home refurbishment shows on cable that exclusively show the flipping process.

These shows give some people the idea that they can become instant millionaires by doing the same thing they watch on the T.V. so they go out and try to do everything they see in the hopes of getting a really cool deal. A lot of people have lost money this way; by not planning and moving in the market.

Surprisingly a lot of the newbie’s that enter in this market actually do earn marginal profits from their first flips instead of turning up a loss. Sometimes the time and effort spent on flipping discourages people from actually continuing in this line of work. At other times they actually fall in love with the whole rehabbing process and keep on working- These are the people who eventually achieve success.

Flipping houses in the Midwest is turning into the next big thing. Everybody’s going it! Wherever you look, there are a lot of distressed properties just lying around waiting to be picked up. There is a lot of fodder to work with for a person who can sniff out the right deal. For anyone who has a solid business plan can really make a decent income flipping homes.

Mentioned below are a couple of main reasons that people actually get into the flipping business.

Almost Guaranteed Profits

The real estate business is quite different from any other big profit business like the commodities exchange, Forex trading, or playing the Stock exchange. Most big profit businesses actually live off trends and the rise and fall of market forces that’s constantly impacted by global and/or local events.

To make it really big in those markets you might require insider information, and some exceptional analytic skills, but not all of us have either those kinds of contacts or the abilities to make it big in those markets.

In the property business, especially flipping properties, the profit is in the buying; if you find a really good deal, get it inspected, and set the right value, you’ve already gotten a deal in which you can possibly get about a 30% profit from your ARV ( after repairs Value )

If you spend around 2% to 5% of the original value of the house in renovations, and complete repairs on budget, you might even go above 40% as in some cases; depending on location, and amenities present in the house, it is actually possible to take the now refurbished distressed property and sell it at full market value.

Free to do whatever you want.

A Person who flips houses as a business can actually have a lot of time on his hands. Apart from visiting the property to see how the work is going by the guys you’ve hired, marketing, and making administrative decisions, you’re actually a force unto yourself. There are no 9 to 5 boring work hours, no overtimes, you certainly don’t bring work home with you, and in that freedom you are able to give time to your family.

In fact a large percentage of rehabbers, hold down regular day jobs. You physically don’t do the work, your money does the work for you. To get by in this industry all you need is a stream of steady finance and the patience to invest in a profitable project. It also helps to have a good team of workers who are trustworthy who can get the job done according to your requirements.

Follow-up investments or Other Business Investments

Since you get a windfall whenever you make a sale, basically a flip property investor has the option to invest into multiple streams of income. Let me give you an example.

Suppose you invest a 100k into getting a 3 bedroom condo, and invest around 10k in repairs and refurbishment, you sell the flipped property in around let’s say 170k in around 6 months.

Now it might take you perhaps the same amount of money to get into a new flip, suppose you take 100k out again for another distressed property you’ve spotted to buy, let’s say you take out 15k this time to repair, you’re still left with a decent amount, you can choose to put it n the bank, or you can put it somewhere where you get maximum returns out of it while you wait for your current project to sell to maximize your capital.

Not putting all your eggs in one basket makes sense because sometimes you get stuck with a property for a long time, you can choose to have other projects or business investments on the side that can help support your primary business goals.

You can’t get scammed

Saying that you cannot get scammed is a pretty bold statement, perhaps there are some scams that we haven’t seen out there for people who flip properties, but nobody can cheat you out of your ownership without paying the agreed amount, and that’s what this business boils down to. Yes there are risks in all businesses but consider comparing this to scams in online businesses and other forms of business. You’re comparatively guaranteed that you will not have to face any adverse situation in terms of transaction if you keep your terms straightforward and clear.

Quick Profit, Quick Returns

Previously we gave an example of a flip properly being in the hands of the fictional flipper for around a period of 6 months. If you do it right, rehabbed properties can sell like hot cakes because you are able to offer them finished, at less than retail. There’s just a big market out there and people are willing to buy homes at marginal rates.

If you can spot a good deal, and get the work done fast, and put it up for sale you can expect to get rid of the property within a few months, possibly less, if it’s in a good location and the cost is set a little low according to the market.

These are just some of the reasons that people get into the property flipping business, if you think you’re interested and want to learn more why not check out our blog for more articles about how to design an affordable flip, tips on buying distressed property