Flipping Works

Two popular methods of investing in the real estate game are known as ‘flipping’ and ‘speculating’. The latter is part of the former method but is a high risk/profit approach.

‘Speculating’ works by purchasing undeveloped property and selling it based on its future value. For example, if a condominium complex is being planned, you will buy a condominium even before construction begins and sell it before the construction is completed. The problem with this method is that if the housing market collapses, as it has now, you are left “holding the bag” if you have not sold the property yet. This is why it is known as a high-risk method.

The method of flipping, however, is much more secure and largely unaffected by market collapses. A collapse is actually a good thing because it allows you to purchase a property at a very low price. You can then proceed to renovate it and offer it up for a higher value, thereby making a decent margin overall. At the very least, you can get rid of it for cost so you are more or less guaranteed of not making a loss.

What does one do if you cannot make a sale due to the collapse of the property market? Well, there is a solution for that scenario too. The rental market is generally high when the sales market is low. So, as long as you do not mind playing landlord for a little while, you can still make money up until the time you are able to sell the property.

As you can see, sometimes the conservative approach can yield better results in real estate investing than high-risk methods.