Pros And Cons Of Real Estate Flipping
Pros And Cons Of Real Estate Flipping
Michael Corbett (Real Estate Expert) gives expert video advice on: What are the advantages of buying property for resale?; What are the financial dangers of buying property for resale?; What's the one thing I should consider before flipping property? and more...
What are the advantages of buying property for resale?
One of the reasons that people get into flipping, one of the things is so fantastic about it, is that you are able to build a second revenue stream for yourself, which means you can do this part time - I was on a soap opera the whole time and I was flipping properties, so you can do it as a secondary income. And not only are you are able to then make a profit by buying the house, fixing it up then selling it, you will be able to take that money and roll it into the next one and do the next and the same thing. Then you can roll that money into the next so that you're literally building your real estate fortune. That's one advantage. The other advantage is the tax benefits of working in real estate. For example, buying a house, living in it for two years, fixing it up and then selling it. After two years, you walk away with 250 or 500,000 dollars tax free. There is no other investment in the world where you can do that.
What are the financial dangers of buying property for resale?
Like any investment, if you don't know what you're doing and if you don't do the numbers first, as I call it, when you're about to buy a property you can get into a lot of trouble. I know a lot of people that will buy a house just because they think, "Wow, this could be a fixer." But they don't actually sit down and actually calculate what they're going to put into it, what the carrying costs are and then what they can actually sell it for. If you don't know ahead of time, before you buy that house, how much you think you're going to make on it, don't buy it. A lot of novices jump in and just buy a house and say, "Oh well the market will bail me out." It's the biggest mistake that real estate investors can make, assuming the market will bail you out. Because you know what, right now that market is not baling anybody out and those people who went in and over paid and over spent are having to give away their houses and lose their money.
What's the one thing I should consider before flipping property?
The one thing is so important to know about flipping is that you make your money in flipping a property before you buy the property. That means, when you go to actually purchase that property you need to know exactly how much you're going to make before you even buy it, or else walk away.
What should every buyer be aware of before getting started in real estate flipping?
Probably one of the most important things that a buyer needs to know when they're buying any house, especially one that they're going to be working on and fixing up, is what their estimated costs are going to be. They also need to know where the market's headed. If the market is going down ten percent every six months, you better know that the house you're buying is going to be worth ten percent less six months from now, and you need to calculate that in ahead of time.
How risky is real estate compared to other types of investments?
I think real estate is probably the most solid investment you can make. If you look at historically, from the 1960's to now, yes, the market has ups and downs, but the market has gone like this. It goes up and down and up and down, but from where it was to where it is, it's been a gradual average of four percent, five percent increase over the past forty years, almost fifty years. It's the best, most solid growth investment you can make, and if you do it smartly and slowly and gradually, there's nothing that beats it.