There’s More Profit in Fix-And-Flip
As a fix-and-flip investor you can enjoy one of the highest profit margins in real estate investment … if you do it right. There are many ways to make money in real estate investment; however a number of them are involve only a single profit component, or maybe two.
In simple wholesaling, you locate a property that you can control through an assignment contract or buy and resell with transactional funding. The profit component is simply your ability to locate properties at such a value that you can immediately resell them to another investor at a profit. In long term rental property investing, you’re getting two profit components, one the cash flow and the other equity appreciation, but the two components of profit are spread out over a long period of time.
Fix-and-flip investing provides two profit components, and they are funneled into a short period of time for full realization of all of the potential of the investment. You’re buying a property far below its current market value and even below its value in its current distressed condition. You could simply flip it right away and make some money. However, you are going to do the repair and rehab work as well. You’re going to be a general contractor which will entitle you to the profits contractors make when they are skilled in estimating and completing the work.
In its repaired and renovated condition you still hold a property with your costs below the current market value. This allows you to also profit from flipping the property to another investor for another profit component for you. The other investor usually desires long term rental properties for cash flow and equity appreciation, so they will happily purchase your flip at a small discount to current market value and a profit for you that includes the contracting profit and the value component.
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