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Flipping Real Estate - Condo FlippingFor most people, buying a house or condo is a transaction they make a few times in their life. Their plan is to live in the house they purchase and pay off the mortgage over 15 or 30 years. If they are lucky, the property appreciates while they are living there, allowing them to eventually sell it for much for than they paid for it. But real estate investors and speculators often have different plans. Their goal is to buy a distressed property at a below-market price, then turn around and sell it at a higher price (sometimes the same day their purchase closes, they turn around and close on the sale to the new owner). This is called "flipping". In some markets and some situations, the savvy speculator can make $50,000 or more on a single transcation.
Especially in the condo market (think Florida condos), people get involved in the pre-construction market, buying condos before they are even built, and then selling them at a profit (or trying to sell them at a profit), again, sometimes before they are even built. A lot of this depends on the greater fool theory, though. This theory assumes there will always be someone willing to pay a higher price that you did (a bigger fool) - but of course real estate prices go up and down, especially in specific hot markets, and no one can guarantee you will always make money buying and selling real estate, especially with the high fees involving bank loans and realtor expenses. Investing in Real EstateSo how does one get started in flipping properties? There are books and websites devoted to the topic. But be wary when buying or investing in get rich quick schemes - if these people were really making fortunes in real estate and it was that easy, why are they spending time selling books, courses, and videos to you instead of being out there buying the real estate themselves? Take everything with a grain of salt. Start at the bookstore where you can browse a book and not spend a fortune. A better course of action is the fixer-upper plan, where you buy/invest in a house in a good neighborhood that needs some work, assuming you can do most of the work yourself (saving a ton in contractor fees). You invest the sweat equity, and you get paid off 8 months later or whatever when you sell the home for more than you paid for it (thanks to your improvements). This is not gambling or speculating, this is actually WORKING, which believe it or not, is how most people eventually get rich, not by some overnight miracle scheme.
With all the buzz about housing bubbles and a hot real estate market over the last year, don't rush into a market that you don't understand. We all have fresh memories of how tech stocks would go up forever, how this was a new economy, how you couldn't lose investing in the NASDAQ. Well guess what, you can lose money when you make dumb investments/speculations at the wrong time. This is as true in real estate as it is in the stock market. So be careful. Research wisely. Don't over-extend yourself.
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