A Helpful Guide to Flipping Houses
Flipping was a colloquial term that eventually gained some parlance due to repeated use.property, purchasing it at a reduced price and then shortly (if not immediately) reselling it for a profit.While flipping can be used in conjunction with many forms of property, such as stocks or vehicles, its most common usage occurs in real estate.
Generally, in real estate terms, flipping refers to buying a property at the lowest price possible, and then, after making some cosmetic repairs or improvements to the property, turning it around and selling it for as high a profit as possible.
Flipping houses is not an illegal practice, and when done correctly in the right housing market, the maneuver can be a shrewd means by which to turn over a real estate investment. The practice of flipping houses, although profitable in many instances, has garnered a rather unsavory reputation. Such a stigma has been attached to the practice as a result of the explosion of many housing bubbles, and the presence of potentially exploitable illegal scams, such as mortgage and consumer fraud. Furthermore, such a maneuver has also been linked to the perpetuation of enabling gentrification in many already lower or middle class income areas.
One of the side effects of flipping houses, even when done honestly, is the propensity for the over-inflation of property values and the proliferation on numerous low interest, low money down mortgages–such instances have been used for both the purchasing of the flipped house by the flipper, and also by the individual seeking to purchase the flipped house. Usually this occurrence has an adverse effect on numerous levels, for it causes the market to become over-saturated with bad loans made on flipped houses that barely leverage against the cost of the loan. As an aftereffect of the burst, the market also becomes stuck with numerous unsold flipped houses, thus depressing the market even further.
The real estate bubble burst (occurred between 2002-2005), in essence, was perpetuated Also hurting the reputation of flipping houses has been the sociological accusations of gentrification, in that neighborhoods with flipped houses tend to increase property values so that over time they drive out lower income families.
Perhaps most fundamentally though, flipping houses represents for many consumers a very risky purchasing situation, where extra safeguards need to be taken to insure that a home has been properly touched up for flipping purposes.