How to Get Into Flipping Houses as a Real Estate Developer

John betzig american re partners

You’ve probably heard about “house flipping,” whether from reality TV shows or around the block in some of the top real estate investment companies. But you’re probably still wondering: Is it a good idea to get into house-flipping as a real estate developer?

For those who don’t know, “house flipping” is all about finding under-market houses, paying for the costs of fixing them up, and then reselling them at a higher price — and pocketing the profits, of course. Because of the current low mortgage rates and dearth of under-market houses currently available in many markets around the country, many real estate developers and real estate investing companies are looking to cash in on the trend.

At the same time, investing in multiple residential homes is a much riskier investment than, say commercial real estate. With commercial properties and land holdings, you at least know that the investment is secure because of the value of the space itself. Purchasing homes, you stand a great risk if the market suddenly fluctuates one way or another and you’re suddenly unable to sell the home you’ve had to finance up-front.

Furthermore, house flipping is a lot of work. Paying for repairs is not always going to guarantee a sizable return on investment, and many people mistakenly overestimate the resale value of the house they buy. Moreover, in a changing economic climate with a new incoming President, first-time buyers may be wary of purchasing at the moment, waiting until the dust settles. Can you afford to hold onto a house for that long?

One of the best pieces of advice for would-be house-flippers is to never think about the final value of the house. Think about the initial investment cost and what you can afford. Don’t risk ruining your entire career as a a real estate developer with one bad buy. This market is not for the faint of heart. If it’s safety you want, stick to commercial real estate, where you can always secure a substantial flow of cash from renting or leasing. But if it’s adventure you seek, now is the time to start flipping!

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