The Fundamentals of Flipping Real Estate

Flipping real estate is fast becoming a popular investment in the 21stcentury. A good number of investors have interests in property as one their ventures. The capital appreciation and huge profits are the main attractions in this choice of investment.

Typically, to gain from capital improvements to a property, an investor acquires property from a strategic locality. He/she does some renovations and increases its features and appearance. After doing this, the investor offers it for sale at a well-determined price that reflects its current appearance.

On the other hand, an investor may simply undertake wholesale real estate investing, whereby, they buy properties at low prices and then resale them at high prices. However, most investors don’t adopt a buy and hold strategy. The essence of flipping real estate is to do it as fast as possible to reduce the amount of time that capital is exposed to risk. Selling the properties as fast as possible has some economic sense as the investor greatly reduces overhead costs such as property rates, utility bills, taxes, insurance and other property costs.

In light of the above, let’s consider the finer details of flipping real estate.

The Figures

One of the most crucial factors in any property flip is the figures. By figures, we mean all the costs involved in this venture. The costs may include:

  • The property acquisition costs
  • The general price range of the property in the market
  • Taxes
  • Insurance
  • Repairs
  • Handymen & professionals (electricians, plumbers, painters, earthmovers, legal officers, etc.)
  • General expenses
  • Holding costs, etc.

The above are the most important costs that a property flipper ought to know to make a rational decision on a property flip. It is recommended that before any flip, an investor should at first be comfortable with these figures.

Financing

Now that an investor has known all the costs that will be associated with a particular flip, the next step is to arrange for financing. If one has a good capital base, then they can finance the acquisition of the property by themselves. However, in the case that they may need some help, the may consider lenders.

Value Addition

After the property acquisition has fully taken place with the required financing, the next task is to undertake value addition. This entails making general improvements to the property. The main purpose is to improve the cosmetic appearance through:

  • Thorough cleaning
  • Repainting
  • Carpeting
  • Replacing sinks, lighting switches, bulb holders, etc.
  • Reworking the garden, landscape works, etc.

The premise here is to improve the appearance to increase the prospects of selling.

The Market

When it comes to the market, there are two considerations, that is, the one in which you will buy the property and the one in which you will sell the property. These markets have unique characteristics which are all dictated by the location in which the properties are based. These characteristics should be considered for one to assess and maximize the returns. In another sense, one should have a suitable target market which has great demand for the property in question. Thus, special focus should be given on the market when flipping property.

Prospect

When you’ve made up your mind, and you have the financial backing to venture into the business of flipping property, go out there and find some deals. Prospect and let everyone know that you are selling the property. Make a rapport with industry players such as real estate agents and realtors. You may benefit from their extensive knowledge of property and the real estate industry.

In conclusion, flipping real estate is a lucrative venture that needs great planning and an unwavering entrepreneurial spirit. The points outlined can give you a great grounding in the business. Anyone can do this business, provided that adequate preparation is done.

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