The old saying goes “the best way to make a dollar is to save a dollar”, but at some point, you’ve got to spend a little in order to make a little, too. Investing is a complex subject revolving around a very simple principle- invest the smallest amount of money possible, invest the least amount of time and money, and get a high return on your initial investment. Whether you’re trying to build wealth, protect your money against long term inflation, or want to find a new source of income (or even add a hobby or career to your life), there’s a form of investing for just about anyone, from precious metals and art, to stocks, bonds and classic cars.
Real estate is one of the most popular ways to invest, and while there are a few ways to do so, the most common is the idea of flipping. Flipping houses has certainly gotten a lot of attention in the past several years, thanks to social media influencers, financial advisors, and being the subject of countless home improvement shows. While it might be fun to watch on TV, it’s a different story when the money on the line is yours. If you’ve ever found yourself considering it, now is a great opportunity to ask the question: Is flipping for you? Well, here’s how you can find your answer.
You Need Something to Invest
Many view the home you live in as a long term investment- most properties gain value over time. Flipping applies the same principle, but to a place you don’t call home. That means you’ll need the capital or credit to purchase a new home or property. If you have good credit and stable finances, you’re in a good position to receive favorable mortgage conditions- meaning an opportunity to capitalize on changing market conditions.
Return on Investment Potential
Anyone who has tracked real estate prices in the past five years knows just how volatile that market can be- and how staggeringly impressive return on investments can be within real estate. While flipping a diamond-in-the-rough property might be the stereotypical approach to flipping, others have made plenty simply by purchasing a property, maintaining it for a short while, and then reselling: a form of speculation not unlike how stocks are often used as an investment.
Investment of Time
Are you looking for an active role or a more passive income from your investment? Flipping a diamond-in-the-rough property is going to take time and money (especially if you’re hiring a contractor), but could yield a great return. Simply purchasing and holding a property might be less of an investment of your time, but doesn’t always net the same dramatic results.
Other Uses
Buying, fixing, and selling aren’t the only ways to use your flipped property. Vacation rentals and housing are both ways to earn a largely passive income- while it may cost you some to maintain and manage the property, this will be offset by the rental income. Not only will the property gain value over time, but you’ll also have that regular income in the meantime. Even if you don’t want to rent, it’s still an excellent opportunity to have a vacation property of your own, for times when you want to “get away”.
What Properties Make the Best Investments?
Everyone knows to look for a good deal… but what actually is a good deal? Compare a home’s asking price to comparable properties in the area. Look for opportunities where a home may be priced below the market average. Keep condition in mind: while small repairs or upgrades might be easy to budget for, a full rebuild could end up costing you more than you initially paid for the property.
What are the Risks?
Very rarely does real estate decrease in value. Even when a market takes a dip in values, prices typically return to their previous levels within a few months. It’s for this reason that so many people invest in real estate. If you’re planning to renovate a home, there is more risk associated, as now you need a return on both the initial purchase as well as the work you had done to the home. Being good with a budget, and having a contractor you can trust can really help alleviate some of the risks. Find the right upgrades and avoid frivolous expenses.
In the search for the “ultimate investment”, many have turned to real estate. The idea of flipping really encompasses several specific ways you can invest with real estate, offering unique circumstances to best suit your desires and goals. Flipping is a great opportunity to put your money to work for you- especially if you’re willing to invest some time and additional resources to really take things all the way. Of course the Anthony Leone Group would love to help you find the right properties. We come with a lot of experience in flipping homes – let us put our experience to work for you!
