Welcome to professorsavings.com, we teach finance basics. Today we will teach you about flipping properties.
Hi I’m Rayfil Wong. We hope these investment concepts will help you be a better investor.
Flipping is a real estate investing strategy that involves buying a property and then selling it for a profit within a short period of time.
The profit can come from appreciation in the housing market but it is more common for flippers to improve the property and then try to sell it for higher price.
Professor Savings is successful house flipper. He carefully chooses a house that he believes is undervalued.
He pays $150,000 for the house and then he spends $25,000 repairing and updating it – repainting the walls, putting up new siding and remodeling the kitchen.
When Professor Savings puts the house up for sale again, he sells it for $200,000 earning him a $25,000 profit for his hard work.
There is also a downside making a profit through flipping.
Professor Savings could lose money on his investment if property prices plunge before he can sell the house.
He can also lose if he spends too much money renovating the house and can’t recoup it all in the final sale, or if the house fails to sell quickly
Professor Savings will be responsible for paying the mortgage, utilities and property taxes on the home, and each payment will eat away his potential profit.
Also, there is no guarantee that Professor Savings will find a buyer.
Flipping real estate can be a profitable strategy for investors who can handle the risks and have plenty of patience for a chance in high returns.
Hint: Make sure you work out the worst case and best case scenario in terms of your numbers.