5 Benefits of Fix and Flip Investing
In the real estate industry, we call it “fix and flip” investing. Some of you may know the practice better as “house flipping” thanks to all the TV shows. Of course, those television shows make it look a lot easier than it actually is, but the good news is that it can be a great money-making strategy if you do things right. A successful house flip can bring you a tidy profit when all is said and done.
Here are some of the best benefits of fix and flip investing (aka house flipping):
1. Quicker Profit
It will take some time to find and buy the right property, renovate it and get it sold. However, fix and flip investing is a much faster way to see profit compared to what’s known as “buy and hold” real estate investing. That is when you hold onto the property for rental income as a slow and steady way to make money. A house flip means you sell it for the highest possible price, which ideally covers the total costs to purchase and renovate the property while leaving plenty of room for profit on top.
2. Interesting Process
Many successful house flippers love what they do. It’s fun to search for homes with “good bones” and negotiate a favorable deal. Then, you get to renovate, which involves planning, design and creativity. Some investors really enjoy this process of turning a run-down house into something great. Then, they get to sell it, collect the profits and move onto the next fix and flip investment project.
3. Not Holding Onto Property
Another key benefit of fix and flip real estate investing is that you aren’t sitting on the property for longer than you need it. You renovate it and sell it as quickly as you can. A buy and hold investor will be benefitting from monthly rental income and long-term property appreciation. However, it takes longer to see a big profit. Plus, there are other expenses to worry about as long as you own the property—including utilities, upkeep/repairs, property taxes and insurance. If you are financing your purchase through a mortgage loan, you will also be able to minimize your mortgage payments. A quick flip minimizes those homeownership costs and you only keep the house as long as is needed to renovate and sell it.
4. Being Your Own Boss
There are some house flippers who do this on the side, and then there are those who pursue fix and flip investing as a full-time career. This type of real estate investing allows you to be your own boss for each project you take on, which some people really enjoy. You don’t need any licenses or degrees, though some investors will secure their contractor’s license and/or real estate license to increase knowledge and profit potential. You don’t necessarily need office space or equipment, as the house is generally your main workplace. You can get into fix and flip investments with relatively little capital (mortgage loans are available or you will pay all-cash if possible). Any money you do borrow can be quickly restored once the house sells.
5. High Profit Potential
When you make good deals and complete renovations in a timely manner, there is a ton of profit potential with house flipping. You will need to find the right properties and run careful property analytics. Don’t overpay for a house you intend to renovate and flip. Then, you will also want to have a solid renovation plan and budget to avoid construction delays and unnecessary expenses. Lastly, you have to take the proper steps to sell it for maximum resale value. When you do all these things well, there can be a lucrative profit at the end!
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