I’m still getting lots and lots of inquiries about flipping, especially with all the press about the rising foreclosure numbers. Shows on TV, articles, and seminars make it sound very easy and folks sitting on sizeable equity find flipping very tantalizing.

What the heck is flipping? “Flipping”, or otherwise known as speculating, is buying an under valued property and within a short period of time re-selling at a profit. Popular versions of this are, during a hot market, buying new construction at ground breaking, then re-selling the home once it’s complete, taking advantage of the short term appreciation. Another version is to buy distressed, under valued properties that have a profitable amount of “sweat equity”. My personal experience with these properties is that in order to make a worthwhile profit you need to do most of the rehab work yourself.

What the average consumer needs to know is that flipping is risky, and needs a conservative approach. The higher the risk, the higher the potential return, or potential failure. It takes patience, lots of homework, a team of experienced professionals, and a good eye for potential. The market of a couple of years ago presented the illusion that flipping was a “sure thing”, with our inflated appreciation. In the last year, I’ve seen several flipped properties go back to the bank, or sell at a loss because of the leveling off of market conditions.

Yes, foreclosures are more common now, but that doesn’t necessarily mean they are a good “flip”. If you do come across a property that is just too good to pass up, plan to hold the property for at least 12-18 months. If that is not within your realistic budget, then you should not be considering flipping.

A more conservative and very lucrative alternative to flipping is investing in rental properties. For the first time in my 3 year career I’m seeing duplexes and triplexes at a price where they are close to break even, with current rent values. Again, do your homework and plan for the worst case scenario. When setting your budget, account for vacancy and give serious consideration to hiring a professional property management firm, as a proactive risk management decision. Also speak with your tax professional to fully understand the pros and cons of purchasing, owning and selling investment properties.

As always, to learn more about investing and/or speculating in our current local market, feel free to call me! I’d love to talk to you about my personal experience and the experience of others I’ve associated with.

Opinions expressed in this article are the opinions of author, and not to necessarily the opinions of Meadows Group Inc.
All rights reserved on all original content, non-original content is given credit | Michelle Berry | 2009