One of the most high-profile real estate business ideas, property flipping has been popularized by addictive TV programs over the last several years. Property flipping involves buying a distressed home, repairing and modernizing it and then selling it for a profit, usually to a retail buyer.
While flipping a house doesn’t offer the continuing cash flow of rental income, it can create large, one-time profits on individual properties.
Many general contractors will buy and flip one or two homes a year for extra money on the side. On the other end of the spectrum, there are real estate investors who specialize almost exclusively in flipping. Like rentals, a property flipping business can be run from your home if you choose.
One of the key factors to consider if you are focusing on property flipping is carrying costs. In order to keep your flip profitable, you need to minimize the amount of time you hold the property.
This is why it is vital to consider the efficiency and availability of your repair or improvement construction crew as well as the state of the market to reduce “days on market” (DOM) once you list the completed property for sale.
Another way to increase profitability on flips is to carefully control costs. Ensure that the improvements you choose will truly pay off at closing. Avoid costly design extras that look good but don’t add to the bottom line. Remember, you are not designing a house for yourself; you’re designing a house for local buyers in a specific market at a particular price point.
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