House flipping is still a fairly popular investment strategy in the U.S. Thanks to the lack of regulation and oversight on financial institutions and banking transactions, those who are savvy can make a tidy sum on house flipping deals – which is nothing more than buying foreclosed homes at a low price, then turning around and selling them for a quick profit.
Like any investment, foreclosure flipping entails a certain amount of risk – so it pays to know what you’re doing before you jump in.
Number One: Know the Territory
If you are to be successful at house flipping, your first step is to research the market thoroughly. Just because you hear about “national trends” in real estate, the fact is that every local real estate has unique characteristics and challenges. Here is a partial list of things that you should know before you start flipping houses in a particular market:
• locations of promising properties
• quality of these neighborhoods
• physical conditions of the properties under consideration
• market values of similar homes nearby
• sources of capital
• local regulations and codes.
Pay careful attention to this last point – and consult with an attorney if necessary. Foreclosure flipping has led to inflated property values in many areas, and in response, certain municipalities enacted laws that make flipping houses more difficult. Usually, these laws require that
(A) the home is the buyer’s primary place of residence
(B) the buyer remains in the home for a minimum of six months to a year.
If you are buying foreclosed homes in need of extensive rehabilitation, this is usually not an issue – since you’ll probably be spending at least that much time making repairs. It does mean however that your house flipping deal won’t be a quick one.
Strategies For Foreclosure Flipping
Buying foreclosed homes can still be lucrative if you go about it correctly. Good candidates for a foreclosure flipping transaction can be found at your local banks and lending institutions, where listings of “distressed properties” are usually maintained. An alternative to buying foreclosed homes is to locate homes for sale by owner. These are usually “motivated buyers” who are facing foreclosure and will be willing to make a deal.
Keep in Mind…
House flipping isn’t rocket science – and it can make you a great deal of money in a short time, provided you are smart about it and move carefully and methodically. Take your time, know the territory, align yourself with people you can trust – and you should be quite successful at flipping houses.