Flipping Real Estate Made Easy
Know Your Market…. First in Series of Articles on Flipping Real Estate
In North America, flipping real estate i.e. buying of real estate and selling it soon after, hopefully for profit, has become popular among investors. If a property is bought and rented out, for whatever reason, it is not a flip.
In the past, real estate was bought primarily for a long term investment and income. Only a few who were in the trade engaged in flipping properties. However, steep drop in real estate prices in most of the United States and steady increase in values in Canada, has offered increasing opportunities to flip real estate. It is not uncommon to hear stories how someone made a killing in one or a few such transactions.
It will not be prudent to think that flipping is easy, it is not simply a matter of buying a piece of property, doing a little touch up or renovation and then sell it for profit –the profits do not come that easy.
For consistent profits, many strict flipping guidelines must be followed. The investor must be nimble enough to react immediately, if the market changes.
Any real estate can be flipped though most investors are focused on freehold homes and condominiums. The commercial properties also offer flipping opportunities but such transactions should be left to sophisticated investors; besides that, these transactions are likely to involve a larger sum of money.
Most important of all the factors in flipping, is the investor’s knowledge of the local area and the market.
The investor should know what is most in demand, is it the freehold houses or condominiums? What is the income group and profile of a typical property buyer or renter in the area; is it a family area or is the area more popular among singles and couples. The family area would have more demand for larger 2-3 bedroom homes, while smaller homes and condominiums would be more desirable to singles and couples. The downtown of most cities have more demand for smaller properties, a smaller house or a 1-2 bedroom condominium would be a better bet for flipping, it will not be a wise move to try to flip a 3-5 bedroom property.
In an area of young families, proximity to schools and shopping is very important. I have seen properties taking a much longer time to sell or rent, if such facilities are not nearby.
In an area of high value properties, the number of parking spaces and garages would be very important factor while in the area of middle income population with moderately priced homes, close proximity to the public transportation would make flipping property relatively easy. In the downtown of major cosmopolitan cities, parking has become a major issue. Parking spot prices have increased at a greater pace than the real estate itself. It is not uncommon to see the underground parking space going for $50,000 -$100,000 and even more. With such high prices, one would imagine that demand for parking spots would be reduced and it would be easier to sell a property without a parking spot. On the contrary, selling a condominium or a house without a parking spot in downtown Toronto is becoming little difficult. Nevertheless, before buying a condo or a house with a parking spot and paying a higher price, one must review the financial implications, if such an investment will bring better returns to the investor flipping real estate.
Knowledge of local real estate values is crucial in flipping. You must know what has sold and for how much; what is not selling and why; what is the current competition and what competition is likely to be there when the investor brings the subject property to the market. Why certain properties were sold at a higher price than others? Rarely a higher price sale is a matter of luck. Usually, a property that fetches a higher price has a higher perceived value -perhaps a better location, more space, renovations or upgrades and so on. A careful review of the details of the sold properties should be very valuable to an investor considering flipping a property in that area.
Fewer sales in an area may indicate some underlying problem but it could also be the case where very rarely properties come for sale. An exclusive area, in any city is always in demand and people wait for years for an opportunity to buy a property. Nevertheless, for a beginner, it is a good practice to favor an area with a large and rapid turnover. An inactive or a slow area may offer better price deals but can become a challenge if the property does not move fast.
Time is very important factor in flipping; if the property does not sell fast, it will drain very valuable cash; renting may need to be considered to preserve cash.
Renting out real estate becomes an investment, good or bad, only time can tell. This option is available to investors but renting out is definitely not in the realm of flipping.
Needless to say, good market knowledge will help you avoid serious mistakes; it will steer you towards more desirable properties and help you make money flipping properties.
About Nawel K Seth & Trail Blazers Realty
Nawel K Seth is a Real Estate consultant and is the broker of Record of Trail Blazers Realty. He has been in the Real estate Brokerage industry for almost 40 years. He holds multiple Post graduate degrees from reputed University of Toronto and can be reached through any of his websites. Trail Blazers Realty, the developer of the website www.FlipCondos.ca , has its offices in Markham, GTA Toronto, Ontario, Canada.
Contact information for Nawel K Seth, M.A.Sc; MBA; MVA and Trail Blazers Realty: Tel: 905-660-7999 / Toll free: 1-866-890-1999.Email: info@FlatFeeCanada.com or info@ClientCashRewardds.com
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