When do you make money on the property flip?

When do you think you make your money in a property flip? Is it when you buy right or sell quick?

I often hear people say, “In real estate investing you make all your money by buying money houseright!”

I think that the truth is,

“Buying Right” is only part of the ‘flipper equation’.

Most property flips have some condition, where repairing and upgrading the property becomes an integral part of working the flip. Even when holding property, eventually some disrepair and maintenance will be required. This makes most property “flips” or investments a three-step process consisting of the buy, the renovation, and the sell.

Clearly, if you buy wrong it’s pretty hard – some say impossible – to turn the situation around, so there is no question that flipping property starts with the buy. People have a great degree of control over the buy if they are objective and willing to walk away from the property. The “trick” is to have solid information that ensures you are buying right. This same information helps reasonably predict, but cannot control, the sell. the sell is always subject to unpredictable market changes, such as the housing bubble of 2008.

Often real estate investors buy right only to see the profit slip away when the renovation goes over budget, takes too long or worse, both. It’s easy to understand why going over budget can reduce profit. But what happens when a project is on budget, but takes too long and the market changes – taking a dive mid project? Either of those two circumstances could be enough to lose some or all of the profit on a flip. Both together, results in either deciding to hold and rent in hopes of the market eventually turning around, selling at a loss, short sale, and even worse, forclosure.

Predicting and controlling construction is all about having two things:

With the right construction managment system and tools in place, you can keep competition fair and reasonable, clearly outline expectations, hold people accountable, control costs, maintain a healthly power structure, and provide checks and balances.

And with unbiased and objective support in place, you can easily sort out confusing and / or conflicting information.

With these two things, you can keep your residential and light commercial project on track, profitable and headache free.

© 2013, RCartright. All rights reserved.

0 Responses

  1. […] you read “When do you make money on the property flip” (read it here!), you know that there are 3 steps in every flip; 1) buy, 2) fix, and 3) sell, and that you make […]

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