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House Flipping; the New Way to Play House

Jun 16, 2008
We've seen it in Reality TV shows, we've heard our friends talking about it, we may have considered it, or even done it ourselves. House flipping can be a fun and lucrative way for amateur investors to get into real estate investing. House flipping refers to the practice of purchasing discount real estate and then quickly selling it, often making huge profits.

There are many reasons that people may sell their homes at discount real estate prices. The house may be in poor condition and require major renovations and repairs, updated plumbing and wiring, flood or fire damage repairs, or have been trashed by renters. One might also be forced to sell one's home as discount real estate due to relocation, divorce, or a pending foreclosure.

Whatever the reason behind the sale of the home, buying discount real estate can greatly benefit the purchaser whether he is looking for a home to live in or planning to sell it as an investment. There are two main ways that people generally flip houses. One is to purchase discount real estate at a low price and selling high in a rapidly-raising market. This can be a gamble, as market trends can change quickly and the investor may be left with one or several houses that aren't appreciating in value.

A safer but much more expensive and time intensive way to flip a house is the 'fix and flip' method. In this scenario the investor purchases discount real estate very low, usually because of severe damage to the property and cosmetic deterioration, and makes heavy repairs. He or she may hire a professional decorator as well, so not only the structural damage is corrected, but the overall aesthetic is dramatically improved. This significantly increases the market value of the house, and can bring a nice profit.

The fix and flip method is typically a better investment for those who are familiar with home repair and can do much of it themselves, as paying professional repairmen can get costly and cut into the overall profit. Fix and flip can also be physically and emotionally draining, again, because the investors often perform much of the labor, and it takes a lot of time and energy to accomplish home repairs.

Investing in discount real estate has typically been a pretty safe investment, but in areas where there is a high concentration of house flipping there is the possibility of having an adverse effect to the cost of living, causing a housing glut, and eventually a market meltdown. Many economists blame the real estate bubble of 2004 and 2005 to an excess of house flipping.
But usually, a community is grateful for the opportunity to clean up neighborhoods by flipping old decrepit homes, increasing property value. According to the 'broken windows theory,' an unkempt house in a neglected area attracts a criminal element, which drives out those making a responsible living, which allows for more criminal element to creep in, and so on in a vicious downward cycle. Investing in discount real estate and flipping homes can help bring new life to deteriorating neighborhoods and improve quality of life for an entire community.
About the Author
Investing in discount real estate (http://www.cashbackrealty.com) and house flipping is a fun way to break into real estate investing. The author Art Gib is a freelance writer.
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