How to Make a Profit Flipping Properties

"Flipping" is the buzzword in the real estate arena these days. Flipping real estate simply means buying property and reselling it quickly for a profit as opposed to holding it long term as a rental. Flipping comes in several varieties, most are very profitable. Here are some strategies used for flipping property.

Buy, Fix and Flip

This is the most common way of flipping property. This involved purchasing a property that needs work, fixing it up, and then selling it on the retail market to someone who is going to live in it. You can easily make $15,000 to $45,000 on one deal, depending on the market and how good you are at finding deals. The danger in this is either paying too much or underestimating repairs. You have to be conservative in your repair costs and the length of time it takes to resell.

Buy, Refinance, and Lease

Instead of fixing up property for all cash, sell for terms. Once you have completed the rehab, refinance the property at its new appraised value. You should have little or no money in the deal. Then sell the property on a lease with option to buy. The rent payment from your renter/buyer should cover the mortgage payment. When your tenant exercises his option, you reap a larger profit, since you do not have to pay a brokers fee.

Buy and Flip "As Is"

Consider purchasing the property and selling it "as is" as a light fixer upper. If the local real estate market is hot, you should be able to sell the property in less than desirable condition just a little below market.

Pre-Construction

In extremely hot real estate markets, prices can appreciate as much as 2% per month. If you time things right, you can put a contract on pre-construction homes or condominiums, then flip it to someone else when the development is complete.

Scouting

A scout is an information gatherer, so not technically a property flipper. A scout finds potential deals and sells the information to other investors. Many people get started as a scout for other investors because it does not take any cash or prior knowledge to look for distressed properties. A scout can expect to make $500 to $1000 each time he provides information that leads to a purchase.

Beware of illegal flippers. Illegal property flipping schemes works like this. An investor buys cheap, run-down properties in mostly low-income neighborhoods. They do shoddy renovations to the properties and sell them to unaware buyers at an inflated price.