One thing that we need from our money is for it to last for a long time – so that our cash can hopefully outlive us! If we can avoid wasting or spending our cash, we can build up a fund to place into a savings account to ensure it goes further in life. We want more from our money, and one of the best ways to get more from our cash is to invest our money to ensure it works for us. Invested money should build some kind of a return. There are plenty of ways that we can invest our cash. We can save in something like the aforementioned savings account, we can buy commodities and trade them, or we can invest in stocks. We can also buy brick and mortar properties. This is called a real estate investment.
Real estate will always represent an incredible investment for investors regardless of their experience in the world of making cash. There are plenty of real estate opportunities worldwide, and one of the ways that we can make cash from real estate is to buy a property, improve its value and sell it on. This is called ‘flipping’ a property.
Flipping property isn’t cheap. Not at all. Properties are expensive, and while you can find and acquire a mortgage to fund the purchase of a property, you will have to pay interest, which if you’re looking to make a return on your investment is bad news. For the interest that you pay on the mortgage, you’ll need to make more and more value on your property just to ensure that you break even. Use tools like mortgage calculators to identify the total cost of a property, not just the assumed value. If flipping isn’t worth it, you’ll be able to find out before you commit to a mortgage with good research.
However, flipping isn’t just about the cost of purchase; it’s also about the cost of renovation. Properties cost money to hold, but also to renovate. Tiling, construction, carpentering – this stuff costs serious, serious money. The simple sum is this; if the value of the final completed project of the house will exceed the tax costs, the interest costs, the initial value and the renovation cost of the property, you’ll make again. That’s a flip done well.
Renovation and flipping properties also takes time. It might take months and years before you find the true value of the property. Selling a renovated property early might lower your potential earnings. You might need to hold onto a renovated property if the market prices dip as well – or you could be selling at a huge loss. To offset this, consider renting the site out, but you’ll have to focus on the property as being a landlord comes with a whole bunch of responsibilities.
Flipping properties is an easy concept in essence, but it can be difficult if you have neither the time, patience or cash to see a long-term project through to fruition.