You see a lot of articles and books about how to make money “real estate flipping.” Perhaps you’re heard radio or television news reports about the illegalities of flipping real estate. Maybe you’ve seen the late-night infomercials promising you easy overnight fortunes.

What’s the truth about making money flipping real estate?

First, real estate flipping isn’t illegal. Because some dishonest real estate investors conspired with deceitful mortgage brokers and property appraisers, their stories made “good news” for newscasters who love to grab attention with “Investors Scam Banks and Bilk Buyers out of Millions!” sound bites. True, some investors defraud mortgage lenders and/or desperate home buyers. Cheating investors hyped up property values, helped home buyers tell untruths on mortgage applications, and conned banks and buyers.

On the other hand, ethical real estate investors make a lot of money real estate flipping. There are many ways to make money flipping real estate:

1. You can help home sellers in foreclosure save their credit by arranging a sale of the property and never even take title. In other words, buy the property and double-escrow the property to a home buyer who wants to live in the home.

2. Find a seller under stress with a bargain property, secure a sales contract, and sell your contract for roughly $500 to $5,000 to a seasoned real estate investor without financing or taking title.

3. Buy a fixer for a bargain price, fix up the property, and sell for full market price.

You can make money flipping real estate without being dishonest or unethical. But first, you need to:

1. Get your credit in order to finance quickly.

2. Study your location so you know what properties sell for.

3. Learn how to negotiate with sellers under stress.

4. Find a good closing agent.

5. Learn how to fix houses or find good professional help.

6. Learn how to sell your property or find a great selling agent.

Before you jump into flipping real estate, do your homework. Copy other successful real estate investors who make money flipping the honest way.

Copyright © Jeanette J. Fisher

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Flipping property is rising in popularity as a form of real estate investing. The truth of the matter is that this is one of the more entertaining methods for many investors that are simply ‘itching’ to get their hands a little dirty. The sweat equity involved in these transactions, while attractive, can also be daunting when skills are inadequate and out and out dangerous in some situations.

If you are one of the many around the world who consider the appeal of flipping property with huge dollar signs in your eyes, you should take care to avoid the following things in order to minimize your risks while maximizing your potential for success.

1) Do not fail to have a qualified inspection of the property before any money changes hands. If you do not have any idea of the types of work that needs to be done then you cannot possibly make an educated estimate of the costs involved in rehabbing the property.

2) Do not underestimate the budget for repairs on the flip. This is one of the most common mistakes that even seasoned professionals make and it can mean the difference between a profit and a loss on the property if you aren’t careful and do not stick to the planned budget.

3) Do not overestimate your abilities. This is another common mistake. The fact that you’ve seen something done on television doesn’t mean that it is something you can do on your own. It costs more money and time to have someone come in and repair your mistakes than to have had a professional do the work from the beginning. This doesn’t mean that you can’t learn how to do some of the work or that doing so would be cost effective. The trick lies in determining where your skills and abilities can really take you rather than where you hope they will take you. Plumbing, electrical, and structural work are generally best left to the professionals unless you have specific experience or training in these fields.

4) Do not fail to hold yourself accountable to your timetable and your budget. real estate investing puts you in the bosses seat and while that is often simple when it comes to driving others, we often have a bit of difficulty when it comes to holding ourselves accountable for time and money along the way. Unfortunately, failing to do so can be a very costly blunder.

5) Do not forget to keep up with receipts, bills, etc. and reconcile the facts and figures daily. It is far too simple to allow a couple of trips to the local home improvement center escape careful scrutiny. Add a couple of these trips per day and you could easily find thousands of dollars missing from your budget with no paper trail to explain the transactions. You could also find that some tools will not work or be needed for the project. Those items cannot typically be returned without the original receipts.

6) Avoid having too many chiefs on the project. If this is your ball game then you need to run with it rather than having 10 people giving contradictory orders. Schedule meetings regularly to discuss progress and any adjustments or changes that may need to be made.

7) Avoid poor planning. This is one step that is the difference for many would be house flippers between success and failure. Plan out every step of the project in an order that makes sense. You do not want to paint the ceilings or walls after you’ve installed new floors. Nor do you want to rip out walls in order to replace plumbing after you’ve painted them. Plan things out in the proper order and allow a day or two between subsequent projects in case extra time is needed. The last thing you want to do is pay a group of contractors to stand around waiting for the paint to dry so they can begin the next step in the process.

There are risks involved in any type of investment. While real estate is one of the greatest things in the world in which people can invest, there are still risks involved. Following the advice above however can significantly lower those risks and give investors the opportunity to have great expectations when all is said and done. Whether this will be your first flip or your fortieth flip there is much that can be reviewed in the steps above that will reaffirm many of the things you’ve learned along the way.

Real estate investments are quite expensive. Not only do you need the money to purchase the property you will be flipping but you will also need money for the improvements, repairs, and renovations that need to be made along the way. Unfortunately, the real estate business is a tricky business and there aren’t very many traditional lenders that are willing to go full out in support of your real estate investment business venture.

This means you are going to have to either fund a good portion of the expenses yourself or you are going to have to find some other means of financing your house flip. First things first, the less you pay in interest the more money you bring home. You do not want to max out your credit cards in search of profits from a house flip if it can be avoided. Merchant accounts aren’t much better but they can help you keep better track of exactly how much money you are spending on the flip and some will even give you 90 days same as cash (this is great if you can complete the process within 90 days).

It should be said that these aren’t methods that are endorsed by the writer but they are definitely possibilities when it comes to funding your house flip. The best-case scenario is that you would have the money to play with and assume no real risk in the house flipping process but very few people trying to get started in real estate investing have that luxury.

That being said, one way that is extremely risky (especially if you are nearing retirement age) is to cash out your retirement funds. This is not attractive for many reasons not the least of which are the facts that there are hefty penalties for doing this and you are risking your retirement security. It is an option however if you are in a bind for your flip. If your flip is successful it’s water under the bridge, the money can be returned or reinvested and the profit from your flip can then help fund subsequent flips or other types of real estate investments.

If you discuss things carefully with your family and decide that you are all willing to take the risk you can also risk your home by taking out a second mortgage for the funds. Again this is not the preferred method because the assumed risk is great for the security of your family. It is very important that everyone involved be aware that flipping houses is a risky investment. Not only is it risky because you aren’t experienced but the real estate market is fickle. Your house could sit for several months requiring costly carrying costs before it sells.

Forming a partnership is another way to share the risks and help lighten the burden when it comes to flipping houses. Keep in mind that this is a stressful business venture and should be treated as a business venture. For this reason a volatile or fledgling friendship may not be the best risk for a venture such as this. If you do choose a partnership you need to carefully discuss the type of financial and labor investment that is expected of each partner and the share of profit that each partner expects to receive as well. You should also consider carefully whether you are willing to risk the friendship for the sake of profits or would you rather go with a partnership that isn’t a close friend (most real estate investment groups have people willing to help with the financial side and assume the risk for the lion’s share of the profits).

Banks will typically fund a portion of the property costs if you can come up with an adequate down payment and show them a well thought out business plan. Do not rely on banks however if you have poor credit, lack a business plan, or do not have a sizable chunk of your own money to invest in the venture.

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