What is House Flipping?

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I read one of the major reasons behind the exponential growth of house prices is due to a business called “House-Flipping”.

What exactly is house-flipping? Why is it so profitable, and how does it works?

Answer:-

The short answer for house flipping is purchasing real state, residential dwellings to be exact, and quickly reselling (or “flipping”) it for profit.

Profits from flipping real estate come from either buying low and selling high (often in a rapidly rising market), or buying a house that needs repair (known as “Fixer Upper”) and fixing it up before reselling it for a profit (“fix and flip”).

The term “flipping” is used by real estate investors to describe “residential redevelopment”. Redevelopment of distressed or abandoned properties or neighbourhoods has sometimes been linked to malicious and unscrupulous acts in the post housing bubble era. The term “flipping” is frequently used both as a descriptive term for schemes involving market manipulation and other illegal conduct and as a derogatory term for legal real estate investing strategies that are perceived by some to be unethical or socially destructive.

More about “Flipping” here: Wikipedia

How House Flipping Works? Flipping houses is as easy as 1-2-3. Here is a cheat sheet : – 1) Buy a house significantly below market value, 2) fix it up, and, 3) sell it. When you actually try to flip a house, however, you soon realize that it’s tougher than it sounds. Get up to speed in a hurry on house-flipping basics, such as fixing a quick-flip house and dealing with financing issues. Repairing and Renovating a Quick-Flip Opportunity As a first-time home flipper, look for quick-flip opportunities — cosmetically challenged houses that you can beautify and sell without a huge investment of time, effort, or repair and renovation costs. This strategy enables you to focus on the overall process and on finding good opportunities. When you buy a quick flip opportunity, your goal is to make the property impeccably clean and well-maintained, something all home buyers want. Use the following checklists to ensure that you focus on the most important and most profitable repairs for your quick flip. Exterior (curb appeal)

Trim tree limbs and shrubs.
Mow and edge the lawn.
Replace dead or dying shrubs and plant flowers, especially near the front.
Apply a fresh layer of mulch.
Remove clutter and eyesores.
Fill driveway and walkway cracks.
Power-wash the siding, tuck-point a brick home, or paint a wood-sided home.
Repair or replace windows and screens.
Add or replace shutters.
Paint the front door and trim.
Paint the garage to match the house.
Replace the gutters. Seamless gutters are best. Install splash blocks or gutter extensions.
Replace the front and rear storm doors.
Replace exterior light fixtures.
Replace the mailbox choosing a color and design that fits in with the neighborhood.

Interior

Give the place a good scrubbing.
Wash the windows.
Install new window blinds.
Clean or replace any drapes or curtains.
Remove hooks and nails from all walls and patch the holes.
Apply a fresh coat of paint to all rooms, using flat, neutral colors for the walls and semi-gloss white for the trim.
Check and repair all doors and doorknobs. Doors should open and close effortlessly.
Install new light switches and outlet cover plates.
Install new smoke detectors.
Replace the thermostat and doorbell.
Re-carpet, refinish, or replace damaged or worn flooring.
Swap out the register covers.
Replace exhaust fan covers and maybe the fans.

Kitchen

Install a new stainless steel sink.
Install a new faucet.
If the countertop looks old or crusty, have it replaced.
Refinish the cabinets, if needed, and add new hardware — knobs and handles.
Apply new shelf liner to all cabinet shelves and drawers.

Bathrooms

Install a new vanity.
Install all new fixtures.
Replace the toilet seat.
Replace old towel hangers.
Replace shower curtains or install glass shower doors.
Apply a fresh bead of calk around the edges and base of the tub or shower, around the sink, and around the base of the toilet.
Scrub the grout between any tiles thoroughly.

Bedrooms

Paint.
Re-carpet.
Replace light fixtures, cover plates, and register covers.
Install closet organizers, if needed.

Basement

Sweep the cobwebs out of the rafters.
Dust off any ductwork, pipes, or wiring.
Tack up any dangling cables.
Seal all cracks in the walls.
Whitewash concrete or cement-block walls with a sealing paint.
Paint the floor using gray enamel paint.
Install new glass block windows, if necessary.
Buy a roll of insulation and stuff pieces of it between the joists where the joists meet the outside wall.

Mechanicals

Change the furnace filters.
Clean or replace the hot water tank.
Repair any leaky faucets.
Unclog any plugged or slow drains.

Sounded easy enough? But it’s a lot tougher here to flip houses, mainly because real estate is very pricey. Meaning you must get financing in order before you look into the flipping works. Financing Your House Flips Flipping houses is an expensive endeavor. You need money to purchase the property, renovate it, pay the bills for the duration of the project, and sell the property. When financing a flip, work with a qualified mortgage broker or loan officer to consider the following sources of cash:

Your own money: Cash and savings, equity you’ve built up in your home (your home’s value minus what you owe on it), and retirement savings.
Personal loans: Cash from family members or friends who are either willing to help you or wanting to invest in real estate without having to do the work.
Conventional loans: Money you qualify to borrow from a bank or other conventional lending institution based on your income, net worth (the value of what you own minus the value of what you owe), and credit history.
Government loans: If you’re buying properties from government-sponsored programs, you may qualify for government loans, even as an investor.
Hard-money loans: High-interest, short-term loans that are often attractive to investors who can’t qualify for conventional loans. (One benefit of hard-money loans is that the lender often accepts the investment property as collateral for the loan, so you don’t have to place your own home at risk.)
Credit cards: Using credit cards to finance a flip is too risky for recommendation, but some investors have used this strategy. Consider using credit cards only in an emergency to cover the cost of last-minute repairs or renovations or to pay holding costs until you can sell the property.

After you purchase a property, you may be able to finance the repairs and renovations by refinancing to pull the equity out of the property. Good luck and happy house flipping.

Not exactly answers, but some interesting read on house-flipping: –