Using real estate as a financial investment has been considered a wise choice for ages. During a boom, one has the opportunity to purchase a property and then sell it within a year for a considerable profit. Even larger sums can be made when the investor decides to "flip" a house, sending the property value of a home skyrocketing.
Flipping houses has also been around for ages but has gained popularity over the past several years due to a variety of reality shows including Bravo's "Flipping Out."
To flip a house is to buy a particular piece of real estate for a very low price, renovate it to raise the value a great deal and then sell it to make a profit. Typical value raisers include adding bedrooms or bathrooms, adding another story and replacing old, outdated kitchen and bathroom fixtures. Flipping houses can be especially profitable for people who are either able to perform their own construction labor or know a close friend who will do it cheaply. Hiring contractors to come out and do all the work will significantly reduce your net earnings because your costs will be much higher.
But with the undeniable drop in the real estate market during the past few years, is it still a sound investment?
In some ways, the down market has provided a wealth of opportunity to those looking to flip houses. The commonality of foreclosures these days lets house hunters take their pick of fixer-uppers, usually at a extremely low price on the market. Many foreclosed houses go up for auction by the banks that repossessed them, sometimes at unbelievably low prices. The other option for buying a house at a very low cost would be to buy a "fixer-upper," a house that is cheap because it is in need of a lo of work before it can be considered inhabitable or desirable.
To buy a nice, previously foreclosed house is typically the better option because there will be far fewer repairs needed and you can focus on adding features to make the house better rather than just making it decent.
With the buying and repairs out of the way, now comes the difficult part: selling it. As stated before, the value of a home can shoot up quickly when the market is booming. When the market cools off, the opposite happens. This means that people stop considering real estate the sound investment it once was. With the market being so unreliable, people do not know whether their purchase will increase much in value.
Because of this, the asking price for a house has to be considerably lower than what you desire. Even if you are lucky enough to sell the house in such a low-demand market, you will not be able to sell it for as much as you would have in 2002.
Flipping houses has also been around for ages but has gained popularity over the past several years due to a variety of reality shows including Bravo's "Flipping Out."
To flip a house is to buy a particular piece of real estate for a very low price, renovate it to raise the value a great deal and then sell it to make a profit. Typical value raisers include adding bedrooms or bathrooms, adding another story and replacing old, outdated kitchen and bathroom fixtures. Flipping houses can be especially profitable for people who are either able to perform their own construction labor or know a close friend who will do it cheaply. Hiring contractors to come out and do all the work will significantly reduce your net earnings because your costs will be much higher.
But with the undeniable drop in the real estate market during the past few years, is it still a sound investment?
In some ways, the down market has provided a wealth of opportunity to those looking to flip houses. The commonality of foreclosures these days lets house hunters take their pick of fixer-uppers, usually at a extremely low price on the market. Many foreclosed houses go up for auction by the banks that repossessed them, sometimes at unbelievably low prices. The other option for buying a house at a very low cost would be to buy a "fixer-upper," a house that is cheap because it is in need of a lo of work before it can be considered inhabitable or desirable.
To buy a nice, previously foreclosed house is typically the better option because there will be far fewer repairs needed and you can focus on adding features to make the house better rather than just making it decent.
With the buying and repairs out of the way, now comes the difficult part: selling it. As stated before, the value of a home can shoot up quickly when the market is booming. When the market cools off, the opposite happens. This means that people stop considering real estate the sound investment it once was. With the market being so unreliable, people do not know whether their purchase will increase much in value.
Because of this, the asking price for a house has to be considerably lower than what you desire. Even if you are lucky enough to sell the house in such a low-demand market, you will not be able to sell it for as much as you would have in 2002.
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