Property Flipping & Assigning Contracts
Is It Speculating or Investing?
Flipping a house refers to buying a house and then selling it shortly thereafter, ideally for a profit!
You buy a house for cheap because it needs some work and you fix it up and then sell it.
OR
You buy a house for cheap that doesn't need any work but the sellers were motivated to get out quickly and you rode in on your white horse.
I've said this before, there's money to be made here. Lots of it.
But it's much closer to speculating than investing. So be aware of that.
Think about it, when you're flipping properties that require renovations, you are basically turning yourself into a mini home builder or renovation company. Is that your goal?
Whenever you buy a property for a "steal" (25% or less of market value) there's a reason for it. So if you are not dealing with an extremely motivated seller then more than likely your property has some major renovations required.
Property Flipping... The Smart Way
Don't get blinded by the "deal", remember this point.
If you are going to do property flipping it's always best to analyze the numbers so that you are making a profit and still able to sell the property below market value. That way you can get it off your hands quickly.
If you need to get top dollar to make any money on the transaction be careful.
Once you calculate carrying costs, real estate commissions, taxes, closing costs on the purchase and on the sale, there may be little left.
Assigning contracts is when you negotiate the purchase of a property and then try to pass that agreement to someone else for an "assignment fee".
If you are looking to make money and have little of your own to get started this may be an option for you. I don't run into many people doing this on a regular basis in any systematic way.
Assignment deals are out there and 100% possible but when you divide your assignment fee of $5,000 or $10,000 by the number of hours you spent looking for a property you may find you've created a minimum wage job for yourself.
If wealth is your goal then buying and holding residential real estate is the surest way to go. Much surer than property flipping.
Your goal should be to create an asset base that works for you so that you're not trading time for money.
We'll dive into more ways to look at cash flow, appreciation, equity build-up and interest only mortgages in an upcoming article.
Return from Property Flipping to Residential Real Estate Investing by clicking here.
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