I have noticed lately that more and more people want to talk to me about flipping houses.  They tell me how much fun it looks and how they are going to get rich just like the people on TV… I am then burdened as being the bearer of bad news.  IT’S NOT QUITE THAT EASY!  That’s not to say that investors in our area do not make a nice living as house flippers, but it is not generally a business that any old novice can walk into successfully. 

But what the heck, I’m not one to try and steer people away form their dreams.  So I encourage the wannabe investors to consider a different approach to flipping houses.  We all know that your money is made when you buy the house, not when you sell it.  That is a truth that will carry across most investments, not just real estate.  So keep that in mind when considering the following philosophy. 

If you have read my previous investing posts then you know that I believe in real estate investing for the long term.  I consider ‘flipping’ houses to be speculative and therefore not a sound investment.  You are buying a property based on your belief that the value is going to increase in a short period of time.  Having said that I do believe that there is a safer way to flip houses, although it will not provide instant gratification. 

Buy low, rehab, rent, sell.

Buy the property which needs work and is priced to make it a good value.  Do the rehab work making sure not to over update for the area.  Make sure the property is in an area that is conducive to making it a rental property and obtain maximum rent once the work is done (lease options are great in this situation).  Sell the property either while rented as a pure investment property or vacant as a primary residence.

This approach provides some protection to the investor because if the property does not sell then they at least have a tenant paying the mortgage.  Over the first year that you have it leased, your principle balance is being reduced, the property is hopefully appreciating, and you are receiving tax benefits and depreciation.  Since selling investment property is often simply about the numbers, your only challenge is collecting the proper rent. 

Stricter lending practices are going to increase the number of renters in todays market.  It has never been a better time to be a landlord, or to attempt this extended ‘flip’. 

Brian P. Hourigan, The Hourigan Team

a Keller Williams Realty affiliate