Flipping houses as a business involves at its core buying a house, and selling it at a higher price, usually within a very short time. While it can be incredibly profitable, it requires a keen understanding of your market, property trends and the ability to forecast house value in a local area. The risk is great, and many people have ended up with unsaleable properties and a high mortgage that needs to be paid. However, the profits from house flipping are also potentially great. The level of risk will depend on your flipping style.
You can make money flipping houses by buying them cheap and selling them at a higher price, often within just a few days or weeks of the initial purchase. However, unless you are able to sell the house yourself, taxes, fees and the share of the real estate agent may take away most of your profit. If you want to go this route, you will need to become really good at understanding your market, and even learn how to find potential buyers even before you buy the property for yourself.
Another popular method to make money flipping houses involves buying a property that needs work (often a euphemism for derelict), fixing it and then selling it at a profit as soon as the last handyman is out of the door. This path is often taken by people with previous experience fixing houses, either because they are in the building trade themselves or because they have the right contacts. The more work a house needs, the cheaper you can buy it but often it may take a long time until the renovation is finished and the house can be sold.
While this can be seen as less risky than buying a property at market prices, as the initial investment is lower, the costs incurred getting permits and fixing the house can be substantial. Unless you are really good at estimating the real status of a house you risk finding out after the sale is closed that the house has deeper issues that will be costly to fix, or that the permits required are going to take months during which you will need to pay for a house nobody can live in.
Another source of cheap houses are bank auctions and repossessions. However, they come with their own set of potential complications, and for people without prior contacts in the market it can be very difficult to get the funds required to pay for an auctioned house up-front. Most of those houses will also require some work before they can be sold at a profit, or the old owners and the bank would have found a buyer themselves.
There is a lot of money to be made by flipping houses, but the risks are also very high and this is not the sort of business you can learn by reading a couple of books or watching some course you bought online. You will need to be able to arrange financing quickly, which may be more expensive than your average mortgage because the initial house value is quite low. You will also need to be able to estimate the real potential of a house, and the amount of money you’ll need to spend renewing it, without getting carried away by optimism. Most people who choose this career path are already in the real estate business, either as landlords, estate agents or construction workers, as flipping houses to make money requires a similar skillset.