Foreclosures: to Flip Or Not to Flip?

One of the ways you can profit from foreclosure investing is if you choose to re-sell it for a profit. But depending on certain conditions, you need to know when you should consider this venture.
| Thursday, October 13, 2011

It is actually not surprising why foreclosed properties have become the ideal home purchases. For starters, they are certainly a lot of cheaper and their purchase alone guarantees the buyer significant savings. In addition, there is also a large inventory of repo home for sale in the market and it would not be difficult to take advantage of such profitable opportunities.

When it comes to foreclosure investing, there are many ways buyers and investors can enjoy legitimate profit. One of the fastest ways is through flipping, which basically means buying a property, renovating it and then re-selling it at a higher price.

Most of you who have been interested in flipping foreclosures are worried about the risks involved in such type of foreclosure investment. In order to know if it is for you, you should learn as much as you can about the process involved.

To Flip

One of the advantages of flipping foreclosures is being able to recover the money you invested almost as soon as you finish renovating the property. If you managed to grab a bargain deal and be able to renovate the home at a reasonable amount, you can easily list the home for a significant profit while keeping it affordable at the same time. Or in tough market conditions, you can simply wait until the property’s value appreciates before you decide to sell. Either way, you get to enjoy a healthy return potential.

Not to Flip

Foreclosure buyers and investors who chose not to flip usually opt for the buy-and-rent strategy. The decision to do so is usually based on prevailing market conditions such as a high demand for rental properties but a lack in supply. In the same manner, a lack in demand for housing even affordable ones and a surplus in supply will make an investor think twice about flipping. By choosing to rent, they enjoy positive cash flow and they could start recovering the capital they initially invested in the property.

Whether you choose to flip or not to flip, the addition of a foreclosed property, bought at a really cheap price, is certainly a smart investment move. Why? Because, eventually, you will sell the property for a nice profit.

Tips for Flipping

If you are decided on entering the foreclosure flipping business, there are probably a few reminders you need to familiarize yourself with in order to avoid common mistakes.

For starters, you need to do a thorough research about the property including its current condition and title. You might also want to check the neighborhood or community, particularly the local housing market to know what type of homes is in demand.

There is also the rookie mistake of underestimating the repair costs. You need to work with an inspector and a contractor to determine the extent of the renovation as well as the expenses which would come with the home improvement.

Lastly, there is the issue of paying more because you were not able to do a comparative market analysis to check how much other properties in the area, similar to the one you are interested in, were sold for.

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