Date Posted: 2012-07-10 01:51:27
Site Posted: Myproperty.ph
Most people who are afraid of taking large risks when it comes to investments turn to tangible assets that don’t necessarily depreciate. And the best example would be real estate. Real estate flipping is one of the popular investment opportunities that attract the interest of people who are constantly searching for means of earning high percentages of profit.
The Nature of Real Estate Flipping
In laymen’s term, flipping real estate is simply the buying and selling of real properties. Its only difference from the trading activities of large real estate companies is the turnover speed. With real state flipping, an investor buys a house or any other property, shortly makes renovations or improvements, and immediately sells it at a higher price with his or her desired profit margin. This is in contrast with how large real estate companies do their trading wherein development and sale of their inventories usually takes months or years to complete.
Essential Considerations when it comes to Real Estate Flipping
You are very much interested in venturing into flipping houses, condos, or lots, but the question is, is it really a good choice of investment for you? The following considerations should help you in deciding.
- Assess the degree of risks you are willing to take. Some people consider real estate flipping as a lucrative and a “sure-profit” venture. But the truth is; it is very much risky especially if you are not equipped with the right skills and knowledge to start. There are several properties sacrificially sold at extremely lower prices caused by the current financial hardships not only in the US but all around Europe as well. Although you can buy these properties cheap, there are no assurances that you can immediately find a willing buyer, meet your desired selling price, or perhaps, the risks of incurring huge expenses while the property stays in your inventory.
- Assess your budget or investment funds. The value of a single property is not negligible; real estate trading is a serious business. To be able to start up flipping real estate, you will need to have sufficient funds to buy a few properties. You could start with one or two properties, but later on, you will eventually learn that you have to maintain additional inventories to earn more or to spread costs.
- Are you prepared for taxes? Real estate transactions whether a personal sale or transfer, company selling its inventory, or flipping is never free from taxes. When you flip a property, there are corresponding taxes that you need to settle before the ownership of the property or the title can be transferred in your name. On the other, there are also capital gains taxes due by the time you sell your properties. Dependent on the tax rules of your country or locality, properties sold via the regular course of business or those that are considered real estate inventories of businesses are taxed higher compared to those that are personally owned by individuals.
- Assessing your market. Another essential consideration before venturing into real estate flipping is the study or assessment of the current conditions on the property market you are planning to enter or join into. There are areas or localities which have managed to maintain a thriving real estate business amidst any financial crisis, but there are also those who suffered too much that buying properties from these areas could be “suicidal”.
- Consider the costs of flipping. Real estate flipping involves costs no matter how short you intend to keep or hold unto the property before selling it. Taxes are among the unavoidable expenses. Other examples include restoration, renovation, and repairs, unsettled or past due utilities, the cost of maintenance, etc.
About The Author: Christopher Z. Lockman of TAG Media Group works with local realtors to gain maximum exposure for their Punta Gorda real estate listings.
(cover image by quinet)
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