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Is House Flipping Good or Bad?

Aug 18, 2007
What is house flipping? In real estate investment, it means buying a usually dilapidated house, remodeling it, and then selling for profit. House flipping was an innovation used by Armando Montelongo of San Antonio, Texas. In five years that he engaged in this business, he was able to establish his own company, Montelongo Homebuilders, which flipped 25 houses a week. This earned him tag as the "Flipping Machine."

The idea of house flipping is to find a rundown house or a property in trouble like in the verge of being foreclosed. The investor buys this property, make minor repairs, and sells it. Many in the real estate industry have questioned house flipping, especially the houses in duress, saying that it is unethical to make profits at the expense of others.

House flippers disagree. They contend that by buying, for example, decaying houses in nice neighborhoods, they are helping beautify the place. The renovated houses not only add beauty to the locale, it also adds to the location's market value. Flippers also say that they get minimal profit in their investment.

Some homeowners sell their property at a much lower price because they want to opt out of their mortgage. They need cash quickly and flippers provide the means of escape for them. Many times they need out due to a death in the family, maxed out credit card bills, job change or another unexpected financial crisis. Having to put the house on the market would take too long and the investor being able to take the house right away is the needed safety valve.

In some cities the nice areas over time can move due to newer houses and businesses moving in or out. This change can cause neighborhoods to become rundown and not taken care of. Later there tends to be a revival in those areas by investors coming in by cleaning up and reworking a lot of houses. Lower homeowners weren't able to do the improvements, but the investors bring beauty to the local real estate.

Not all flippers renovate the house or houses they buy. Depending on the condition of the house, flippers may opt to sell a property as soon as he can. By making renovations, even some polishing or repainting may cost more money. So the sooner that the house is sold, the better it is for the flipper.

Flipping has been around for years, but only recently has it hugged the limelight brought about the TV hit Flip This House and the success story of Armando Montelongo. Flipping can be as little as just painting and patching work or more like replacing the siding on a house
About the Author
Sam Carrara is a real estate investor and entrepreneur, as money gets tight it helps to know profitable ways to get rid of debt and save money. One resource for House Flipping knowledge is found at: http://www.flip30.com/flipping/
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