Six Strategies for Property Flipping

These days 'Property Flipping' has become the buzzword for making money in real estate. You will find books, magazines and newspaper articles and even TV shows on this subject. How does real estate flipping work and how you can profit from this strategy?

Property Flipping as opposed to 'Buy and Hold' strategy means to purchase a property with the sole aim of selling it within the shortest span of time for quick cash profits. You can use several strategies to make money with flipping real estate:

Strategy No 1: Fix and Flip

This is the most commonly used strategy. You have to be good at finding a bargain property that needs some work. You then make improvements to it and sell it to a person who wants to live in the property. This strategy works exceedingly well because it is time tested and true. You can make excellent profits anywhere from $10,000 to $50,000 depending upon your purchase price, work involved and neighborhood.

Problems can arise in 'fix and flip' strategy when either you pay too much for the property, under estimate the cost of carrying out repairs or do not take into account the marketing costs and agent fees at the time of selling the property.

Strategy No 2: Fix and Lease it with an Option to Buy

This strategy is suitable in a slow market when selling for cash is a problem. After you have carried out the improvements to the property you should get a new valuation for the property and refinance so that you have little or no money in the deal. You should then on Lease the property with 'Option to Buy'.

You must ensure that rents from your tenant/buyer cover your mortgage payment. You will reap a big profit when the tenant exercises his option to buy. This is because no brokerage fees are involved and you will also gain from lower capital gains tax if the option is exercised by your tenant after one year.

Strategy No 3: Buy and Flip without a Rehab

This strategy works when the markets are on the upswing or if you are a great negotiator and an expert at buying properties well below market value. It works great for people who do not like to dirty their hands. To succeed with this strategy you have to buy a property well below its market value and then sell it marginally below market value in order to make a quick sale. The biggest advantage of this property flipping strategy is that the turn around time can be very low and you can cash out your profits within days and at times without having to settle on the property. You can then re-invest your profits into buying a new property to flip.

Strategy No 4: Buy and Flip 'Off the Plans' Properties

You can use this strategy in very hot markets when prices are increasing at the rate of 2% every month. Developers generally give a discount when they are selling properties 'Off the Plans'. If the prices move upward during the period of construction which takes any where from 9 to 18 months you can make a handsome profit on a very small deposit.

You have to be very careful with this strategy in case the prices tank during the period of construction. The trick again is to buy pre-construction property below market value. You have to be vary of developers who sell 'Off Plan' properties at future projected values leaving no money in the deal for you.

Strategy No 5: Wholesale

When there are there are too many investors in the market looking for rehab properties you should try and flip the property for a small profit to another property investor without getting involved in any rehab work. The market in such a situation will be too saturated for you to make any decent return on your time and effort. Your profits no doubt will be small but they will come quickly without any risk.

Strategy No 6: Be a Scout

This is strictly speaking not a property flipping strategy because as a scout you only gather information on potential deals and sell this information to a property investor who does the flip. The scout is also known as the “bird dog” who does the leg work. Being a scout is a good strategy for inexperienced investors with little or no capital to start out the journey into property flipping. The fee for a scout based on the price of the property and potential to profit from the deal.

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