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House Flipping Basics

By Malcolm Rivers

Flipping properties has become much more popular lately. There are websites, television shows and other forms of media dedicated to showing ordinary people how to make money through real estate transactions. As with any concept that becomes popular or important, there is a large amount of misinformation on how to make money by buying and selling properties and you should use caution. Flipping properties is, basically, buying a property while the price is low with the expectation that its value will go up. There are several ways to make a property's value increase that are used when flipping. The first way is by actual improving the property. Improving a property through repair or adding pieces will bring the value of the property up. The second way to increase property values when flipping has become recently en vogue; buying in an "up and coming" neighborhood or area and expecting the value to increase as property values increase in the area in general. The elements that this article covers are how house flipping works and the do's and don'ts of house flipping. Let's get started!

How House Flipping Works

The real estate market is cyclical. Different areas fall in and out of favor as the demographics of the area change, influencing the property values of the area. Understanding the area cyclical nature of real estate and knowing where to buy is the first stage of successfully flipping a property. Know which areas are due to become more popular or are near new developments and likely to have increasing property values. Some things to look for when considering where to buy are new commercial and retail developments like new superstores, or an influx of new, popular bars and restaurants. Use the knowledge of where to buy to direct your next steps. Once you've chosen an area, its time to choose a property to purchase. If you choose to buy a fixer-upper, know that you'll be unlikely to sell it in its original state and commit yourself to improving the property. Remember that you don't have to purchase a fixer-upper or a foreclosed home, you can buy a property requiring no repair and still sell it at a profit if you buy in the right area.

House Flipping Do's and Don'ts

The do's and don'ts of house flipping are crucial. An awareness of what to avoid and what to pursue can be the difference between owning a property that sits, earning you nothing and a truly successful real estate transaction.

Things to Do

  • If it's your first purchase, consult a financial adviser or another expert before trying to flip a property
  • When choosing an area, do careful research into the current property values and what's planned there that may buyers in and make the area popular
  • Be careful when considering taking on a mortgage to purchase the property you're considering, loans can take on a life of their own when not carefully planned and managed.

Things to Avoid

  • Buying without having your finances in order.
  • Never hesitate to sell short (sell at a loss) if the expenses of the purchase; the taxes, fees, costs of upkeep and repairs, etc.; begin to become a hazard to your overall financial well being. Getting stuck in the idea that you are guaranteed a profit or that there's never a time to fold on a deal is a good way to lose money
  • Do not expect to make a profit on a timeline. Expecting profits on an arbitrary timeline or rushing when engaging in a transaction will make you more likely to make a crucial mistake in a deal. Be patient.

Keep in mind that these are the basic things to consider when flipping a house. This list is an introduction to the idea, you'll need more information in order to successfully flip houses. As always, do your own research before getting into the real estate market for profit. Best of luck!

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About The Author

In 2005, Malcolm attended Harvard University where he received his Bachelors of Arts...

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