What Is Property Flipping And What Are Its Types?
Property flipping can be useful for you if you want to earn quick money as a real estate agent, but it is generally considered as a fraudulent practice. Flipping can be described as an act of buying a property at a price lower than the market value and quickly reselling it at a higher price for earning profit. There are two methods of flipping. One is to buy a house at a low price, repair it, and then sell it off at a higher cost to earn profit. The other way is to buy an under construction house from a company or contractor, complete the construction and sell it at a profitable price.
- Types of flips
There are 2 types of flipping in practice that are given below.
1. Cosmetic Flip – It refers to laying a lot of stress on paint, wallpaper, moldings and fixtures. Some structural changes like adding doors or windows and adding or changing sky lighting, might also be done.
2. Total gut – It means total destroying and rebuilding of the house.
The type which suits you depends on several factors such as your budget, time available, experience in each type of flip, availability of contractor, etc.
- Tips to be followed for flipping
Flipping can be very profitable but there are a few factors that you need to keep in mind for successful flipping. Some of the factors are mentioned below:
1. Identify the proper housea – The first step to flipping is identifying the house that will earn you profit. The house should be in need of repair and you should make sure that it’ll earn you considerable amount of profit.
2. Don’t get emotionally involved – Always keep in mind that you are flipping the house for earning money. So never get emotional while repairing the house. Do not repair it according to your tastes but in a way that will attract the buyer.
3. Hire reliable and reputed contractors – There would be many things that you cannot do yourself. For this reason you should hire a good contractor who can help you finish the work on time at a lesser cost.
4. Pricing the house – Once the construction is complete, its time to do the pricing of the house. The price should be 2 to 3% lower than the market price but it should include all your expenditures on the house.
Property flipping can be profitable but you should always follow the HUD guidelines on seasoning. Seasoning is the period of time the owner has owned the property. If the seller has owned the property for less than 90 days, then he would not get a conforming loan. Thus, while flipping a property, proper care should be taken regarding fulfillment of various rules and guidelines.