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Using real estate as a financial investment has long been considered a wise choice. During a boom, one has the opportunity to buy a property and then sell it within a year for a sizable profit. Even larger sums can be made when the investor decides to “flip” a home, causing a home’s property value to skyrocket.
Flipping House has also been around for a long time, but has gained popularity in recent years due to a variety of reality shows, including Bravo’s “Flipping Out.”
To flip a house is to buy a particular piece of property at a very low price, renovate it to greatly increase the value, and then sell it for a profit. Typical increases in value include adding bedrooms or bathrooms, adding another floor, and replacing old and outdated kitchen and bathroom fixtures. Remodeling homes can be especially cost-effective for people who can do their own construction work or who know a close friend who will do it cheaply. Hiring contractors to go out and do all the work will significantly reduce your bottom line because your costs will be so much higher.
But with the undeniable decline in the real estate market in recent years, is it still a good investment?
In some ways, the bear market has provided a great opportunity for those looking to move houses. The similarity of foreclosures these days allows home hunters to pick out homes that are in need of fixing, usually at an extremely low price on the market. Many foreclosed homes are put up for auction by the banks that foreclosed on them, sometimes at incredibly low prices. The other option for buying a home at very low cost would be to buy a “fixer upper,” a home that is cheap because it needs a lot of work before it can be considered uninhabitable or desirable.
Buying a nice home that has previously been foreclosed is usually the best option because far fewer repairs will be needed and you can focus on adding features to improve the home rather than just making it decent.
With the purchase and repairs out of the way, now comes the hard part: selling it. As stated before, a home’s value can skyrocket quickly when the market is booming. When the market cools, the opposite happens. This means that people stop seeing real estate as the good investment it once was. Because the market is so unreliable, people don’t know if their purchase will increase in value much.
Because of this, the sales price of a home has to be considerably lower than you want. Even if you’re lucky enough to sell the house in such a low-demand market, you won’t be able to sell it for as much as you would have in 2002.
The most important factor to look for in this scenario is a qualified and experienced real estate agent with a track record of selling properties quickly and at a good profit.