‘Flipping houses’ is actually a very misunderstood and often confusing term which is commonly generically applied to more than one method of buying and selling real estate. So how does House Flipping really work?
Fix & Flip
The house flipping that we see on television typically shows the buy, fix, and flip strategy of investing in residential houses. In this scenario real estate investors are picking up distressed properties at prices they believe are discounted. Then they dig in to repairing them, improving them, and sometimes even replacing them. Once they have a finished and polished product the home is unveiled to the public via an open house with the hopes of achieving a high purchase offer right away. This can be a great strategy for profiting from real estate, and can offer a valuable service to sellers, the economy, local neighborhoods, workers, and buyers.
However, this isn’t the only way to ‘flip houses’.
Fix and flip investors can vary widely on how much fixing up they do. Some prefer sticking to basic cosmetic improvements. That means looks. Great value and profits can be found simply by improving the appeal of a home. We’ve all heard about ‘curb appeal’. This might include giving the landscaping a makeover. Some will stick to basic interior and exterior painting, putting in new flooring, and changing a few fixtures.
Other investors love going all in with more serious rehabbing and renovations. They may change and modify floor plans, replace windows, tear out and make over kitchens and bathrooms. They could put in swimming pools, convert rooms, and more. This may take more money, time, and expertise, but it can be exciting.
A few investors are brave enough to take on the most daring property challenges – those with structural issues. This includes items like roofs, foundations, plumbing, electrical, and hazards such as termite infestations and mold. Properties with these problems are often discounted to account for these additional costs and risks. With less competition some investors find this a great niche. Others steer clear of the extra liability, capital requirements, and liability.
The president of Florida based Keyes Company Realtors has said there will always be an opportunity to reposition properties. Repositioning is a broad term, includes many ways for investors to increasing the appeal and value of a property for resale. This may incorporate some of the above methods, as well as enhancing the profitability of a property, its usage, and financial performance. It could mean a basic cosmetic makeover and then remarketing to a different buyer group. For instance; adding modern design elements, putting in high speed internet and promoting the property as a great choice for tech workers. It could also mean adding value by leasing more units, or replacing tenants with higher paying ones, or different types of tenants.