Lance Mohr is your Tampa real estate expert, with over 10 years of experience and 15 years of investing. Please visit our Tampa Bay Real Estate website and add our Tampa real estate blog to your favorites section of your browser.
If you have spent any time online in recent years or if you read newspapers or watch television with any degree of regularity you likely have heard of flipping properties. You may have heard some stories of individuals who have made money through real estate flipping. With all of this said, you may have heard at least something about flipping, but you may not know what real estate flipping is all about. You may be wondering if it's is right for you.
First of all, in essential terms, flipping is a process through which an investor purchases distressed real estate at a price that is below the going market rate. After making the purchase at a distressed cost, the buyer will then generally work to rehabilitate and renovate the property. With these improvements, the buyer is then able to sell the home to a new purchaser for a higher price. If the investor pays attention to the bottom line, he or she normally can make a nice profit on their efforts.
Examples of real estate that is considered distressed and suitable for purchase in a flipping process includes property in foreclosure, in a pre-forclosure process, bank owned property (REO), being sold at a tax sale, property involved in a probate or estate case, property involved in a divorce action or homes that is not in good physical condition.
You need to keep in mind that in some quarters flipping has developed a proverbial bad name in recent times due to people who have engaged in illegal practices. In these cases, bad operators will in fact purchase distressed properties. However, rather than actually improve the property, the typical bad player will align his or her self with an equally unprofessional appraiser. The appraiser and the property owner scheme together to inflate the valuation of the property. The buyer then sells it to a new buyer for an improperly (indeed, illegally) inflated price. The seller and the appraiser will work out some deal to split the proceeds from the scheme. Again, this is a wholly illegal process.
The bottom line is that you should not involve yourself in flipping unless you really do have some expertise in real estate investment and Florida real estate laws. When all is said and done, flipping really is not something that effectively can be done by a complete novice.
Moreover, you need to keep in mind that there are risks involved that are not evident in other types of real estate investment. The most significant risks center around the whole process of purchasing homes for a price below the market rate and then be able to rehab the home without putting too much money into the process so that it can be resold at a rate that allows for a profit to be generated. In some instances, there can be a very fine line between success and failure.
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