{"id":84451,"date":"2016-12-18T13:30:40","date_gmt":"2016-12-18T20:30:40","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=84451"},"modified":"2021-03-16T12:16:36","modified_gmt":"2021-03-16T18:16:36","slug":"invest-for-profit","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/invest-for-profit","title":{"rendered":"Why You Should Consider Flipping Houses for Profit (Instead of Investing for Cash Flow)"},"content":{"rendered":"

You have to spend<\/span> money to make money, right? So when you start out in real estate and purchase your first buy-to-sell house, you are going to find yourself rather cash poor. But that\u2019s OK! In the long run, you are going to be making huge profits. It can be hard to see at first because your bank accounts may appear depressingly empty. Signing that contract, laying down that cash, and then paying for all the repair work… Ouch! But keep your eyes on the prize — the profit will be worth it in the end, and if you persevere, you will see green.<\/p>\n

Why Choose Flipping Over Rentals?<\/h2>\n

Although rentals are in many ways an easier, safer, longer-term investment, I like to take my chances and invest in buy-to-sell properties. This is also called flipping houses<\/a>, a process through which you buy houses, improve them (either aesthetically or structurally), and sell them on for a higher price. Alternatively, if you\u2019re really in the know about the market, you can simply buy a property at the right time, hold onto it for, let’s say, 6 months, and sell it when the market peaks for a tidy profit without any renovating (keep in mind that this is a very high-risk game, and I strongly suggest against investing this way). Personally, I find the former a more enjoyable, more interesting, and more rewarding tactic. Before the housing crisis of 2008, house flipping was a very popular way of making money in real estate, but once the market plummeted, many people backed away from this style of real estate, deeming it too risky. Now, however, with our markets stable and strong once more, flipping houses is regaining popularity across the globe.<\/p>\n

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Why? Because it works! Yes, the first few purchases and rehabs might force you to eat Vegemite on toast a few nights. But that won\u2019t last if you are good at what you\u2019re doing. Remember, for every house you turn a profit on, you\u2019re earning cold, hard cash. This is cash you can either keep, effectively making it profit, or invest in more properties to flip. The most important part of any house flip is that you are<\/span> buying the right property for the right price. Keep an eye out for houses that\u00a0have been on the market for a long time where you might be able to strike a deal with the seller. But don\u2019t buy places so dilapidated that you have to spend tens of thousands just making the space live-able again. (Leave this type of property for when you have quite a few deals already under your belt). And remember that no matter how beautiful the finished house is, location always matters! Think about good districts in terms of employment, schools, and amenities when looking to buy any property.<\/span><\/p>\n

Related:<\/strong> 6 Clever Ways for House Flippers to Save Big on Remodeling Supplies<\/a><\/em><\/p>\n

Some real estate investors choose to buy and rehab houses for renters. This is fine if you have a large amount of money sitting in your bank account, but for those of us who don\u2019t have this luxury, selling is always the best option. Although tenants will hopefully provide you with a monthly lump sum, the collected rent is unlikely to cover your personal expenses, and you will need numerous such properties in order to gain financial freedom. Now, for the vast majority of real estate investors, when it comes to flipping houses, <\/span>the properties are renovated to be sold immediately, rather than waiting decades for the trickle of rental income to finally turn into a profit.<\/span><\/p>\n

Low-Cost Housing Flips Reap the Biggest Rewards<\/h2>\n

Lots of cheaper house flips are more profitable than one large house flip. Although you can successfully flip a large house for significant cash, the time and energy spent renovating is usually equivalent to completing three or four low-cost flips. Therefore, I would recommend that anyone new to house flipping start out at the lower end of the market. Plus, these properties cost less in the first place and you\u2019re more likely to be able to secure any financial backing you need. As the market improves, deals are harder to come by, but if you take the time to look and research, you can find them. <\/span><\/p>\n

Once you\u2019ve found your property, there are some types of renovation work that\u00a0are <\/span>guaranteed to increase the value of any house. These are:<\/span><\/p>\n