I have just finished watching a US TV programme which shows investors buying properties auctioned off by the banks, renovating them and quickly flipping them for significant profits. While I have been aware of flipping properties for some time, it made me think, is this practice still profitable and is it something for everybody to consider?
Is flipping still profitable?
If buying properties and flipping them very quickly for a significant profit was as simple as it sounds, everybody would be doing it. There are a number of factors to take into consideration, strategies which come into play as well as the fact you need to be financially secure for what can sometimes be significant gambles.
Finding the properties
In the US for example there are hundreds of properties very quietly auctioned off by the banks each and every day. Many of these auctions never reach the mass press, they never attract the attention of the general public and in some ways they can appear as some kind of “secret club”. It is bizarre to think that banks are literally selling properties as quickly as possible to bring in capital yet they do not appear to be interested in publicising these particular events. Why?
Quote from PropertyForum.com : “There is no doubt that the worldwide real estate market is recovering although performance differs from country to country. At this moment in time what is your favourite real estate market which you would happily invest in?”
The simple fact is that those who have investment, are experienced and can close a deal very quickly are the exact type of customer these banks are after. As soon as the gavel goes down, your paddle number goes up, you are then expected to move along, pay up and receive your keys (although in some cases there are not even any keys available!).
The type of market you look at, the type of property you go for and the amount of investment you make will depend upon your financial situation. Many people will start at the lower end of the market, clean out a property, redecorate and flip for it a few thousand dollars. There are others who will invest hundreds of thousands of dollars on potentially luxury properties, in very good areas, which are run down, have been neglected and offer the potential for significant returns.
Many people believe that it is some of the less luxurious areas which actually have the potential to create the maximum investment return. Many potential investors will be put off by specific postcodes, specific areas and reputations which may go back many years and in some cases are not relevant to the modern day. These are the type of areas where you can pick up properties for a song, redecorate, make some minor adjustments and flip for a significant amount of money. The more of these properties you are able to flip the great your investment fund and you can then begin to either move up the investment ladder or take on more than one property to flip.
Is flipping for everybody?
If flipping was a simple as some suggest then everybody would be doing it so, flipping is not for everybody. You need to have an eye for a bargain, you need to be focused on your financial outlay and you need to be able to make any adjustments, redecorating or structural changes as quickly as possible at the lowest cost possible (although you will need to balance this between cost and quality).
The next time you are flicking through your cable channel, or your Sky TV remote, check out the array of property programmes and you might come across the “flippers”. If you have the time, sit back, give yourself a few minutes and visit the world of the flippers for not only entertainment but possibly some investment ideas for the future.