Since we’re not selling “get rich in real estate” courses here, we can tell you the upside AND the downside.
To be sure, the concept is valid. You buy a home with leverage, possibly do some simple upgrades, and sell the home. Your actual investment is the “downpayment” and your profit is the difference in the sales price after you flip it.
Full time folks in this business use other people’s money for the downpayment and split the profits so that they don’t even have to come up with new start up capital. But as the Sacramento Bee records, there are BOTHBig risks, and rewards in home ‘flipping’.
This topic is hot because the real estate bubble is still bursting. Banks are selling property for pennies on the dollar to get bad assets “off the books”. Their bad asset sold for pennies on the dollar may be available at a steal to you – if you can sell it for more money. Selling in this market may be the issue, though resales within a month’s time were happening.
Here are some of the risks you may not otherwise hear about:
Blasquez, Graves and O’Toole say the fast compensation is appropriate for a high-risk business.
“You have to pay cash in full. You don’t get title insurance. You don’t get to inspect the house, and you probably have to evict the current owner or occupant,” said O’Toole. “It’s because of these things that properties at the courthouse steps are sold at a discount.”
Graves said one of his LLC clients discovered that “the prior owner (a drug dealer) had committed suicide in the home, and he had basically just bought a crime scene that had not been cleaned up.” Though he sold it for $40,000 more than he paid, Graves said he still lost $12,000 after paying for the cleanup and an unexpected tax lien.
One way to profit from this trend without too much risk is to provide the clean up services for these investors as long as the “clean up” is your normal mop and broom kind… not dead bodies!
Related Link: Cleaning Foreclosed Homes For Banks – Is This a Viable Business Opportunity?
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